The S&P 500 has rallied about 16.7% this year, and the bench...

The S&P 500 has rallied about 16.7% this year, and the benchmark index just had its fourth positive week in the last five amid ongoing optimism that an improving inflation backdrop — and any pockets of weakness in the economy later this year — could lead to a Federal Reserve interest rate cut.

The June consumer price index, which will be released Thursday, could bolster those hopes if the headline number shows a slight improvement, as currently expected. Producer price index data will be released Friday.

Last week, labor data reflected a slightly cooling labor market, spurring expectations of a rate cut. But although the U.S. economy added more jobs in June than anticipated, there was also an unexpected rise in the unemployment rate, to 4.1% from 4%. Traders are currently expecting two interest rate cuts in 2024, with the first in September, according to the CME FedWatch Tool.

“This [June jobs report] keeps the upcoming inflation data in the driver’s seat for determining the timing of the first cut...signs of continued moderation of economic growth and the labor market will likely be a positive for equities and high yield bonds in, at least, the short run,” Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors, said.

A slew of major banks, including Citigroup and JPMorgan Chase, will kick off second-quarter earnings season this week. PepsiCo and Delta Air Lines are also set to post results.