Equity markets tread water this week while traders waited for the May PCE price index to be released. The data is expected to be hot, but it may not matter. The market action suggested the rally would continue with or without a cooler read on inflation, opening up additional risk. The Fed suggests that more than 1 and even more than 2 more rate hikes are needed and that there could be 2 back to back hikes this summer.

As always, the earnings outlook will drive the S&P 500 this year. As it is, the market continues to expect a return to growth in the back half. So long as that remains in the picture, the market should be able to claw its way higher. The question is how high it can go. The Fed is on track to tighten the screws again, possibly leading to more bank failures and the recession hovering on the horizon for the last 12 months.