Equity markets tried to extend the rebound on Monday but were cut short late in the day. The S&P 500 advanced more than 1.0% in early trading only to reverse course in the afternoon and close closer to breaking even than not. This move is a sign of hopefulness from the market but also of indecision, and that is right, given the news due out later this week. Not only is this the first week of peak earnings season for the Q4 reporting period, but the December CPI is also due out.

The CPI is due on Thursday and is expected to give a mixed signal. The headline figure is forecast to fall while the core rises, leading to hot YOY figures. The YOY figures are expected to cool, but there is risk in this outlook. Even with a cool down, CPI is running above 5% at the headline and core level and almost 3X the FOMC's target rate. In this scenario, the FOMC will continue to hike rates and keep them at elevated levels well into 2023.