Equity investors face a tough decision in the weeks ahead. The FOMC is about to hike interest rates by another 50 basis points, and the S&P 500 is on the brink of what could be an abysmal earnings reporting season. The first reports from the banking sector were better than expected but resulted in a downtick in the outlook for Q1 and Q2 earnings, sure to bring the index down with it. The latest news is that analysts expect earnings to decline by at least 0.5% in the first half of 2023, and the estimates are still trending lower.

This week could be pivotal for the S&P 500. The latest read on retail sales is due on Wednesday, which could be weaker than expected. The consensus of economists is for sales to have fallen by at least 1.0%, including the impact of inflation which is up 6.0% versus last year. The takeaway is that economic activity in the retail sector is in contraction on both a volume and a dollar basis and will drag S&P 500 earnings power down with it.