Markets are kicking off a make-or-break stretch with inflation, jobs, and more Fed policy looming

Good morning, readers. I'm Phil Rosen, reporting from New York City.

The Bureau of Labor Statistics publishes January's CPI data at 8:30 a.m. ET today.

Economists expect inflation to have cooled to 6.2% year-over-year, down from 6.5% the prior month.

Inflation continues to come off June's high of 9.1%, but it remains well above the Fed's 2% target. Policymakers have reiterated hawkishness on several occasions, yet markets are still acting like easing rates are a sure thing.

Fed Chairman Jerome Powell warned — once again — last week that rates may eventually end up higher than markets anticipate as the fight against inflation remains far from over.

Now, ahead of the CPI report, let's check in with the outlook for stocks.

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1. Stocks have gotten off to a blazing-hot start to 2023 — but that rally has tapered off.

Both the Nasdaq and the S&P 500 are coming off their worst weeks of the year, with the indexes shedding 2.14% and 1.11%, respectively.

The losses have been accompanied by increased volatility, which isn't uncommon ahead of fresh economic data.

Indeed, inflation's been moderating since the middle of last year thanks to the Fed's interest rate hike campaign. Investors have poured back into the same Big Tech and growth stocks that saw dramatic sell-offs throughout 2022.

Markets have cheered on hopes of a central bank pause or pivot, but Powell has pushed back on that narrative, trying to signal that more pain could loom.

Meanwhile, JPMorgan forecasted that investors could expect a 2% stock surge today if the CPI data shows cooling.

"This bullish outcome would likely pull yields lower, along with the US Dollar, and boost risk assets," JPMorgan strategists wrote in a note to clients.

High-profile market-watchers like "Big Short" investor Michael Burry and Wharton professor Jeremy Siegel have cautioned that stocks are set to plunge sooner than later.

In their view, the Fed's aggression will tip the economy into a recession, and that will ultimately make stocks' early-year gains short-lived.

To Bernstein strategist Matthew Palazzolo, today's inflation reading will kick off a momentous five-week stretch for equities.

The jobs report on March 3, the next inflation report on March 14, and the Fed meeting on March 22 will shape the rest of the year for stocks, he explained to my colleague George Glover.

"It's absolutely an important stretch here," Palazzolo said "A little bit more than a month from now, we'll have a great deal of evidence as to whether the rally will sustain or we'll give some of this back."

Remember, the central bank has a two-pronged mandate: stable prices and maximum employment.

That means inflation and jobs reports hold particular sway over how policymakers act.

"If there's enough evidence that inflation is still high or the labor market remains strong, that's going to place a greater probability on future hikes that aren't priced into the market," Palazzolo added. "That would cause equity markets to soften from the levels they're at today."

What's your economic outlook for the year? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.

2. US stock futures rise early Tuesday, as investors brace for the key CPI print. Keep up with the latest market moves here.

3. Earnings on deck: Coca-Cola, Restaurant Brands, and Airbnb, all reporting.

4. Morgan Stanley's stock chief said a key signal that has flashed before the 2000, 2008, and 2020 market crashes is blaring again. Mike Wilson, one of Wall Street's top forecasters, said that big declines are still ahead for the S&P 500: "History shows price downside is in front of us, not behind us."

5. China is ramping up Russian oil imports and Beijing could greenlight even more volumes. According to a recent research note from Energy Aspects, Chinese refiners have been on the sidelines over recent months, waiting for the go-ahead from the government. Get the details.

6. Cathie Wood's Ark Invest snatched up $9.2 million of Coinbase stock. The purchases followed the crypto exchange's sizable January rally. As for Wood's fund, it's coming off its best-performing month to date.

7. Shark Tank star Mark Cuban warned that AI tools like ChatGPT will worsen online misinformation. The veteran investor pointed out that social media platforms like Twitter and Facebook are already susceptible to inaccuracies even though they're run by humans. "Once these things start taking on a life of their own," he said, "it will be difficult for us to define why and how the machine makes the decisions it makes."

8. This 29-year-old stock trader returned 132% in 2022. Not only did he crush the market during a rocky stretch, but he's remained profitable for four consecutive years. He shared his top tips for profiting no matter what the broader landscape looks like — including a key indicator and one chart pattern he trades no matter how the price rallies.

9. Meet real estate investor Dave Allred, who owns over 1,250 units across the US. He said more millionaires are made during downturns, like the upcoming housing correction. These are the four strategies he recommends for growing wealth in 2023.

10. Your best bet for where the stock market's going this year can be found in the two-year Treasury yield, according to Mohamed El-Erian. The top economist said that if the indicator continues to go up, there's reason to worry. Dig into the numbers.

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.

Edited by Jason Ma in Los Angeles and Hallam Bullock (@hallam_bullock) in London.