With the S&P 500 perched at all-time highs, traders will be taking the pulse of the economy in the week ahead to see if growth is keeping up with the stock market's high expectations.
There are a few important data releases, including durable goods Tuesday, first quarter GDP revisions and the PCE price index Thursday, and consumer sentiment Friday. The Treasury auctions $108 billion in notes, and there are few Fed speakers.
"We have fewer macro drivers, and we'll be more micro focused. Incrementally, we're getting more comfortable with the message the 10-year is sending us," Art Hogan, chief market strategist at Wunderlich Securities.
The presidential election in Ukraine Sunday will get attention, but events there have not been troubling markets lately. Russian President Vladimir Putin said Friday Russia will respect the outcome. Barclays analysts note the geopolitical risk has stabilized over the last several days, but there is risk of violence during the election that could lead to re-escalation.
"We do care if there's escalation because our only response is going to be economic and that's going to take the economy of Europe that's on the mend and trending positively back into recession pretty quickly," Hogan said.
Stock traders will also keep an eye on the bond market, which spooked investors when the 10-year yield fell below 2.5 percent earlier in the month. There was concern the low yields in the bond market were signaling an economic slowdown, but some bond strategists say it was more a move based on short covering and underinvested fund managers repositioning.
"Our threshold for pain on the 10-year is a bit higher than it was in the last few weeks," said Hogan. The yield was at 2.53 percent late Friday.
The S&P 500 ended the week up 1.21 percent and closed at 1,900.53, which was an all-time high. The Dow was also up at 0.70 percent, ending the week at 16,606.27. The Nasdaq's weekly gains were higher as well, up 2.33 percent, closing at 4,185.81.
The Nasdaq had been pummeled along with the Russell 2000 in recent weeks, but has been reversing that trend. The Russell, down as much as 10 percent from its March high in the past week, gained 2 percent for the week to close at 1,126.19 and is now down about 7 percent from its high.
The divergence between the large caps and small caps has sparked talk of a possible correction looming, with the Russell perceived as a warning for the broader market. "I'm still a believer in that momentum stocks and growth stocks will continue to have their day going forward," said Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management. "Are they a canary in the coal mine? The answer is no. Sometimes they are, and sometimes not."
He said the Russell often makes a big move lower during the year, but last year, it did not. Mortimer also is not in the camp expecting a big market correction because for now the four things he thinks could upset the market are not a problem. "I'm bullish now," he said. "Things that kill a bull market are rising interest rates, rising inflation, valuations and it could also be a policy error."
He said the Fed could trigger a policy error, as it tapers back on its bond buying and moves toward normalization of interest rates. The markets are hypersensitive to messages about the removal of policy by the Fed. "They could taper too quickly. They could do something like they did in the 1930s which was take the punch bowl away too fast. We're in unchartered territory so I have my eye on that just to see how it manifests itself," he said.
Traders are also keeping a close eye on economic data, to see if it supports the view that second quarter growth will pick up to a 3 percent or greater level. First quarter GDP is reported Thursday, and the revision could show a slight contraction after a tiny 0.1 percent gain in growth in the first reading.
Personal consumption expenditures data is also released. The inflation component is watched by the Fed as its preferred gauge over the CPI.
"Core consumer inflation could be moving up a little, to 1.4 percent (year over year)," said Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi. He expects markets to pay close attention to that number. "Anyone whose looking for higher bond yields, we could get a shot in the arm next week in terms of core levels could be higher than expected," he said.
Durable goods is a volatile number, but the report Tuesday should provide some clues as to business spending. "I don't think people realize that nondefense capital spending orders are a proxy for business spending and are at all-time record highs," Rupkey said.
Corporate America's cash hoard has been eyed as a potential source of growth for the economy if it actually gets spent, and there are signs companies may have begun to put more money to work on capital expenditures during the first quarter.
Bank of America Merrill Lynch credit strategists combed through the quarterly filings of 416 major, non-financial companies and found that U.S. companies ramped up cap ex spending. The year-over-year last 12 months growth in cap ex jumped to 5.6 percent, versus 2.2 percent in fourth quarter, 2013.
"For the first time in three years, we see a pickup in cap ex," said Yuriy Shchuchinov, vice president of credit strategy at BofA Merrill Lynch. The strategists use their own metrics to calculate the cap ex gain. "We look at the medians. What's a typical company doing versus the total universe," he said.
What to Watch:
Markets Closed for Memorial Day
Earnings: AutoZone, Bank of Nova Scotia, Signet Jewelers, Workday
8:30 a.m.: Durable Goods Orders
9:00 a.m: FHFA Home Price Index
9:00 a.m.: S&P Case-Shiller Index
9:45 a.m.: PMI Services Flash
10:00 a.m.: Consumer Confidence
10:00 a.m.: Richmond Fed Mfg Index
10:30 a.m.: Dallas Fed Mfg Survey
1:00 p.m.: 2-Yr Note Auction
Earnings: Bank of Montreal, Michael Kors, Seadrill, Toll Brothers, Chico's FAS, DSW, Palo Alto Networks
7:00 a.m.: Mortgage Applications
1:00 p.m.: 5-Yr Note Auction
Earnings: Costco, Canadian Imperial Bank, Pall Corp., Sanderson Farms, Abercrombie & Fitch, Avago Tech., Esterline Tech., Lionsgate, Nimble Storage, Omnivision Tech., Splunk, Veeva Systems
8:30 a.m.: Personal Income & Outlays
9:45 a.m.: Chicago PMI
9:55 a.m.: Consumer Sentiment
2:00 p.m.: Fed's Lacker Speaks
3:00 p.m.: Farm Prices
5:00 p.m.: Fed's Plosser Speaks
This article originally appeared in CNBC.