Retailers, Inflation, Middle East Focus of Coming Week

Overall, however, retailers are expected to report solid results for the fourth quarter after a strong holiday shopping season. Luxury retailers reported stronger results last quarter, and investors will be looking for signs that the trend will continue.

"I will be very interested in looking at the spread between haves and have-nots ... contrasting the numbers coming out of Nordstrom(JWN), Saks(SKS) and Polo Ralph Lauren(RL) and the numbers coming out of Wal-Mart(WMT) and Target(TGT)," Phil Orlando of Federated Investors told TheStreet.

Kohl's(KSS), Target and Gap(GPS) will be among the other retail earnings to watch in the coming week. All three report on Thursday.

Analysts expect the chatter on inflation to dominate market conversation in the week ahead after China raised its reserve requirement by half a percent for the second time this month. Investors are worried that inflation in emerging markets has begun to trickle into developed economies as well, with consumer inflation up 4% in the U.K.

The producer price index in the U.S. rose to a two-year high last week, stoking concerns of inflation in the country, even though the central bank maintains a benign inflation outlook.

Tim Speiss, head of personal wealth advisers at EisnerAmper, says that while the annualized inflation rate of 1.6% in January is not high on an absolute basis, the market is concerned about the "rate of change" in prices.

"Companies have done a good job of reducing costs. The fact that they are talking of passing on costs means they are not able to drive costs lower any further," said Speiss, adding that that could be one reason why inflation needs to be monitored and could spike further.

As yields climb on bonds, investors might also be wise not to ignore fixed income, Speiss says. He advises clients to consider adding a mix of corporate bond funds and a diversified municipal bond portfolio to their bond portfolios.

According to Frank Fantozzi of Planned Financial Services, investor worries about inflation are a bit "overdramatic."

"We don't think inflation is an issue until 2012," said Fantozzi, citing low wage growth and slack capacity in the U.S. as factors that would curb rising prices.