Despite a lackluster session on Friday, stocks clinched a second straight winning week as investors brace for the start of first quarter earnings season in the week ahead.

Last week, the S&P 500 (^GSPC) rose more than 3.5%, the Dow Jones Industrial Average (^DJI) rose 3%, while the tech-heavy Nasdaq Composite (^IXIC) gained over 4%.

All three indexes remain in the red for the year but are within 1% of erasing all of the year's losses.

This coming week, big bank earnings will feature on the calendar, with JPMorgan (JPM), Wells Fargo (WFC), Bank of America (BAC), and Citi (C), alongside investment banking giants Morgan Stanley (MS) and Goldman Sachs (GS), all set to report results.

From the tech world, Netflix (NFLX) is also expected to report its first quarter results. The economic data calendar will be relatively quiet.

Traders will also keep close tabs on developments out of the Middle East, with the US and Iran set for high-level negotiations on the tenuous ceasefire this weekend in Pakistan.

Last week's two most important economic data points on Friday were, on the one hand, unnerving for investors โ€” inflation surged by the most in four years, and consumer sentiment hit a record low.

On the other hand, both data points gave insight into a period that may have been fleeting.

The Consumer Price Index for March showed headline prices rose 0.9% last month, the largest monthly increase in inflation since June 2022. This was mostly due to the surge in energy prices that followed the onset of the US-Iran war. And though the outlines of that conflict winding down remain fragile, there is hope that oil prices โ€” the main source of this inflation โ€” might stop going higher in the weeks ahead.

Similarly, the University of Michigan's first look at consumer sentiment in April showed its index falling to a record low. Almost all (98%) of these responses, however, were gathered before the ceasefire was announced last Tuesday.

Oliver Allen, senior US economist at Pantheon Macroeconomics, wrote Friday that the decline in sentiment points to a slowdown in spending, "even if the extent of the deterioration it signals is less clear."

Similarly, Rick Rieder, chief investment officer of global fixed income at BlackRock, wrote in a note after the CPI data that these readings "are not point-in-time indicators, but rather they reflect a pricing trend over a certain period of time."

Which means, in Rieder's view, that what matters more than one month's inflation print is what "shocked higher oil, natural gas, other industrial commodities, including gases such as helium etc., means for the global economy in the period ahead."

In other words, we knew inflation would surge and consumers wouldn't feel great about it. This was confirmed on Friday.

How they do or don't respond to developments in the geopolitical conflict that triggered extreme moves will better map to the reason investors care about these economic developments in the first place, which is how the economy might influence the Federal Reserve's next move.

Since the outbreak of the US-Iran war, the most important number in financial markets has been the price of oil.

As of Friday, the price of one barrel of West Texas Intermediate (WTI) crude oil stood at just under $98 a barrel. That's up from around $68 on the eve of the war.

Go out a few months on the futures curve, and oil for delivery in July is trading closer to $85. The current daily quotes for oil are contracts for delivery in May.

And so, if oil prices in July do indeed converge toward that pricing โ€” another way of saying, if "oil prices" come down 15% โ€” then the stock market just might get back to record highs.

"We're keying off the July contract in WTI," said Julian Emanuel, Evercore ISI's head of equity, derivatives, and quantitative strategy. "Our work shows that, essentially, a price of WTI in the low-to-mid $80s, given the decreased importance of oil in the economy and to the stock market, is enough to not be a material headwind for stocks."

And as this week showed, stocks will start going up โ€” or at least stop going down โ€” if the price of oil stops going up. Simple story, until it changes.

If you're a software investor, look away.

Though by now, you probably already have.

The biggest loser during this latest phase of the AI boom has been software stocks. And the selling resumed apace this pace week.

The iShares Software Sector ETF (IGV) fell more than 7% last week. Year to date, IGV is down 30%. And this, of course, flatters some of the individual moves being suffered by the fund's constituents.

Shares of AppLovin (APP), Intuit (INTU), and ServiceNow (NOW) are down more than 40% this year.

The biggest contributor to IGV's decline this year โ€” Salesforce (CRM) โ€” is down over 35% this year.

Microsoft (MSFT), Palantir (PLTR), and Oracle (ORCL) โ€” each of these stocks is down more than 25% for the year.

So, while the indexes tell a story of a stock market that has been resilient, the dispersion within markets has seen entire sectors getting washed out.

And it's not all bad for AI-related trades. Companies exposed to the hardware side of the AI trade, for instance, have been market leaders, with the VanEck Semiconductor ETF (SMH) up over 20% for the year.

Constituents there include names like Intel (INTC), Applied Materials (AMAT), Lam Research (LRCX), and Marvell Technologies (MRVL). Each of these stocks is up more than 50% this year.

Economic and earnings calendar

Economic data: Existing home sales, March, month-on-month (+0.2% expected, +1.7% expected previously)

Earnings calendar: Goldman Sachs (GS), Fastenal Company (FAST), FB Financial Corporation (FBK)

Economic data: ADP weekly employment change, week ended Mar. 28 (26,000 previously); PPI final demand, month-on-month, March (+1.2% expected, +0.7% previously); PPI final demand ex food and energy, month-on-month, March (+0.5% expected, +0.5% previously); PPI final demand, year-on-year, March (+3.4% previously); PPI final demand ex food and energy, year-on-year, March (+3.9% previously);

Earnings calendar: JPMorgan Chase (JPM), Johnson & Johnson (JNJ), Citigroup (C), Wells Fargo (WFC), BlackRock (BLK), Bitmine Immersion Technologies (BMNR), Albertsons (ACI), CarMax (KMX), Rent the Runway (RENT)

Economic data: MBA mortgage applications, week ended Apr. 10 (-0.8% previously); Empire manufacturing, April (-0.2 previously); Import price index, month-on-month, March (+1.3% previously); Import price index ex petroleum, month-on-month, March (+1.2% previously); Import price index, year-on-year, March (+1.3% previously); Export price index, month-on-month, March (+1.5% previously); Export price index, year-on-year, March (+3.5% previously); NAHB housing market index, April (38 previously); Fed releases Beige Book

Earnings calendar: ASML Holding N.V. (ASML), Bank of America (BAC), Morgan Stanley (MS), The Progressive Corporation (PGR), PNC Financial Services (PNC), Kinder Morgan (KMI), M&T Bank (MTB), J.B. Hunt Transport Services (JBHT), First Horizon (FHN), Winmark (WINA)

Economic data: New York Fed services business activity, April, (-22.6 previously); Philadelphia Fed business outlook, April (18.1 previously); Initial jobless claims, week ended Apr. 11 (219,000 previously); Continuing claims, week ended Apr. 4 (1.79 million previously); Industrial production, month-on-month, March (+0.2% expected, +0.2% previously); Manufacturing production, March (+0.2% previously)

Earnings calendar:  Netflix (NFLX), PepsiCo (PEP), Abbott Laboratories (ABT), Charles Schwab (SCHW), Prologis (PLD), BNY Mellon (BK), U.S. Bancorp (USB), Marsh & McLennan (MRSH), The Travelers Companies (TRV), Infosys (INFY), Citizens Financial Group (CFG), KeyCorp (KEY), Alcoa (AA)

Friday

Economic data: No notable economic data.

Earnings calendar: Truist Financial Corporation (TFC), Fifth Third Bancorp (FITB), State Street (STT), Ally Financial (ALLY)

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