President Donald Trump will keep Wall Street on its toes as he starts his fourth week in office, but Federal Reserve Chair Janet Yellen's semiannual monetary policy testimony and major economic data will likely drive markets next week.
All three indexes closed at record highs Friday for the second consecutive day as markets saw gains for most of the week amid Trump's promise to reform taxes in the near future.
"It's one of these unloved bull markets where so many strategists are calling for a pullback," Sam Stovall, CFRA's chief investment strategist, said in a phone interview. "With everybody expecting a pullback, we probably won't get one until much later."
The president on Thursday, in a meeting with airline and airport executives, said that lowering the overall tax burden on American business was important, adding, "we're going to announce something I would say over the next two or three weeks that will be phenomenal in terms of tax."
In fact, in the coming week, investors will be waiting for clues on potential policies on infrastructure spending, and tax reform. Fed chair Janet Yellen may be able to provide some clues at her semi-annual monetary policy testimony before the Senate Banking Committee, along with other Fed members who are scheduled to speak next week.
John Canally, chief economic strategist at LPL Financial, said that Yellen's testimony may be the "catalyst next week to get everyone again talking about the corporate tax plan, the border tax and personal income tax cuts."
"I think it's Yellen and all the data for January and February that will kickstart the fiscal policy part of the Trump administration," Canally said. "For the first three weeks it's been more about trade and immigration. I think it might start to pivot more back to taxes and the economy."
The Fed didn't raise interest rates at its last meeting and provided few signals on the next rate hike. The Federal Open Market Committee kept the federal funds rate unchanged at 0.5% to 0.75%, after increasing rates by 25 basis points at its December meeting.
On Tuesday, markets will hear from Federal Reserve members, including Richmond Fed President Jeffrey Lacker, Atlanta Fed President Dennis Lockhart, and Dallas Fed President Robert Kaplan, who plan to speak at conferences and panel discussions. Fed Chair Yellen's testimony will begin on Tuesday at 10:00 a.m. ET.
On the economic calendar in the coming week, the consumer price index, retail sales, empire state manufacturing survey, housing market index, the Energy Information Administration petroleum status report and the Federal Reserve's monthly index of industrial production will be released on Wednesday.
Boston Fed President Eric Rosengren and Philadelphia Fed President Patrick Harker are also scheduled to speak Wednesday.
On Thursday, investors will receive housing starts, jobless claims, and the Philadelphia Fed business outlook survey. On Friday, Cleveland Fed President Loretta Mester will speak on monetary policy.
Earnings will be on watch. On Monday, First Data (FDC) and Vornado Realty Trust (VNO) will report quarterly earnings. On Valentine's Day, Devon Energy (DVN) , Discovery Communications (DISCB) , Dr. Pepper Snapple (DPS) , Incyte (INCY) , Fossil (FOSL) , LendingClub (LC) , and T-Mobile (TMUS) will report.
Barrick Gold (ABX) , Applied Materials (AMAT) , CBS (CBS) , Cisco Systems (CSCO) , Equinix (EQIX) , Groupon (GRPN) , Hilton Worldwide (HLT) , Marathon Oil (MRO) , Pepsico (PEP) , Kraft Heinz (KHC) , TripAdvisor (TRIP) , Williams Companies (WMB) will report earnings Wednesday.
On Thursday, Alexion Pharmaceuticals (ALXN) , Avon Products (AVP) , Charter Communications (CHTR) , Duke Energy (DUK) , Hyatt Hotels (H) , MGM Resorts International (MGM) , and Wendy's (WEN) will release quarterly earnings.
On Monday, Trump plans to meet with Canada Prime Minister Justin Trudeau to discuss jobs.
"We do a lot of trade with Canada," Canally said. "I think markets would like to see a nice happy handshake meeting coming out of that. We aren't making too many friends south of the border, so we need to keep our friends north of the border."