The S&P 500 Index topped 5,000 for the first time this week, but investors will see if the momentum can sustain into next week with more inflation data and earnings results on the table. The 5,000 mark does not represent technical resistance for the S&P 500, but a nice round number has had psychological meaning for investors in the past – and could represent a level at which stocks can further rally or consolidate from here. The broader index topped 4,000 for the first time in April 2021. The debate over whether stocks will continue their record-breaking move or crash is a moot point for investors. Some expect that an expanding economy, even if slowing, will continue to fuel earnings growth and push stock prices higher. But others fear the milestone is a reason to be more cautious and advise traders to use the opportunity to take some profits, especially in what appear to be large-cap technology stocks. Worrying signs cited include rising bond yields, with the yield on the 10-year Treasury note rising to 4.15% this week. Wharton Business School’s Jeremy Siegel said on CNBC’s “Closing Bell” Thursday: “Remember, when we think about 5,000, it wasn’t that long ago that some very big names were telling us that the S&P was going to drop to 3,600,” “Le stocks, in the long run, there will be volatility. I don’t recommend playing the game of being a short-term trader, I know a lot of people do that,” Siegel continued. “But I don’t believe in any way that the market is overvalued for a long-term investor right now.” But Karim El Nokali, investment strategist at Schroders, said investors should proceed with caution: “Usually, when the market sees those big round numbers – sometimes the first time it encounters those numbers – you see a bit of retracement”. On Friday, both the S&P 500 and Nasdaq Composite headed for their fifth straight week of gains, and their 14th winning week out of 15. Better data supports bullish thesis Recent optimism in markets can be traced to a combination of better results higher-than-expected earnings, as well as signs of easing inflation, a stronger labor market and a more resilient economy, all of which point to a rosier outlook than many expected for 2024. So far, about two-thirds S&P 500 companies reported fourth-quarter earnings, and results showed signs of strength after a lackluster start to the season. FactSet data shows that S&P 500 earnings are posting a 2.8% increase in the fourth quarter, which would be the second consecutive quarter of earnings growth, and some expect the positive momentum to remain intact in the coming weeks. “What we’re seeing is that companies have done a really good job of preserving their profit margins. And we’ve actually seen even a little bit of an acceleration or reacceleration, again, in some of the profit margins and that’s been encouraging for us to see on the earnings front,” said Tony Welch, chief investment officer at SignatureFD. Other big earnings results in the coming week include Arista Networks, as well as Marriott International, Occidental Petroleum, Deere and Applied Materials. Wall Street will receive more inflation data next week and investors expect it to continue the recent downward trend. In fact, stocks rose on Friday after the December inflation reading was revised even lower than previously reported. The January consumer price index will be released on Tuesday, with prices expected to rise 0.2% for the month and 2.9% year-over-year, according to a Dow Jones consensus estimate. That would be roughly in line with, or lower than, the previous month’s readings of 0.2% and 3.4%. A more interesting data than expected could be greeted with enthusiasm, pushing the S&P 500 index even higher. However, a more inflammatory data could pour cold water on Wall Street’s rally by sending Treasury yields higher. But SignatureFD’s Welch expects the bull market to continue into 2024 and predicts any market weakness will be “benign.” He recommends traders invest in small-cap stocks, which he believes will outperform over the course of the year. “Our forecast is that the bullish phase will continue through 2024. Just like every year, there will be volatility and corrections along the way, but these, in our view, should remain benign into 2024,” Welch said. “So if you see some weakness in the market, this is an opportunity to add exposure if you haven’t already.” A “thin and ever-tapering” rally Others worry that the divergence between mega-caps and the rest of the market is starting to look unsustainable and points to a near-term decline. The S&P 500 is up 5% this year, with Nvidia up more than 40%. Semiconductor designer Arm Holdings rose 65% this week after reporting robust earnings and making rosy earnings forecasts. On the other hand, the equally weighted S&P 500 Index, which places the same value on each stock in the index regardless of its market capitalization, will be only 0.6% higher in 2024. And the small-cap index Russell 2000 small-cap stocks are down nearly 1% this year. “Small caps have given up all of their outperformance for the fourth quarter, and we’re back to what we had for much of 2023, particularly in the summer period, which is an increasingly subtle rally here as the S&P moves to the upside,” Jason Hunter, JPMorgan’s chief technical strategist, said on CNBC’s “Closing Bell” Thursday. “So it’s something that has been able to, as we just said in a note, defy gravity here, despite the lack of market breadth and the repeated attempts at reversal, but it’s certainly not broad breadth and widening rally at this point,” he added. “In our view, this is something that makes it seem like the trend is now established and is preparing for at least a short-term pullback.” That said, Hunter said the market trend remains up, as long as the S&P 500 doesn’t fall below support levels at 4,800. “Our view is that we don’t quite reach the 5,100 and 5,200 area, that we’re going to stall below that,” Hunter said. Other concerns abound, including heightened geopolitical risks, political tensions in a U.S. election year, as well as a flare-up of concern over regional banks. New York Community Bancorp shares fell more than 25% this month after the Long Island bank reported a surprise fourth-quarter loss, a large loan loss reserve and cut its dividend. Many investors expect concerns to be largely limited to NYCB. However, with investors just over a month away from the start of 2024, many investors are looking for more clarity to see how the economy and earnings will hold up, and how the Federal Reserve will act, before making a call on how stocks will continue to perform. “I don’t think we’re leaning too far in any direction right now,” said Matt Kishlansky, director of GenTrust. “It seems like a very twisted moment both ways.” Next week’s calendar All times ET. Monday, February 12, 2024 2:00 PM Treasury Budget Earnings (January): Arista Networks, Waste Management Tuesday, February 13, 2024 6:00 AM NFIB Small Business Index (January) 8:30 AM CPI Earnings (January): MGM Resorts International , Airbnb , Welltower , Akamai Technologies , Marriott International , Howmet Aerospace , Molson Coors Beverage , Coca-Cola Co., Hasbro , Ecolab , Biogen Wednesday February 14, 2024 Earnings: Occidental Petroleum , Albemarle , Kraft Heinz , Generac Thursday February 15, 2024 8: 30 Continuation of Claims for Unemployment Benefits (02/03) 8.30am Export Price Index (January) 8.30am Import Price Index (January) 8.30am Admission of Initial Claims (02/10) 8: 30 Empire State Index (February) 8:30 AM Philadelphia Fed Index (February) 8:30 AM Retail Sales (January) 9:15 AM Capacity Utilization (January) 9:15 AM Industrial Production (January) 9:15 AM Manufacturing Production ( January) 10 Business Inventories (December) 10:00 AM NAHB Real Estate Market Index (February) Earnings: Deere, Applied Materials Friday, February 16, 2024 8:30 AM Preliminary Building Permits (January) 8:30 AM Construction Starts (January) 8:30 AM PPI (January) 10:00 Michigan Sentiment Preliminary (February)