The stock market ended the week on a downtrend, driven by a sell-off in the technology sector. The tech-heavy Nasdaq Composite index led the losses, falling over 1% for the week. However, the equal-weighted S&P 500 managed to log a weekly gain for the seventh consecutive week, as investors sought opportunities beyond the dominant tech giants.

Investors in the coming week will face a crucial test leading up to the Federal Reserve's March 20 meeting. The Consumer Price Index (CPI) report for February, set to be released on Tuesday, will provide an updated look at inflation. Additionally, retail sales and consumer sentiment reports will feature later in the week, giving insight into consumer spending patterns.

Earnings will also be in focus, although the schedule is relatively light. Companies such as Dollar Tree, Dollar General, Dick's Sporting Goods, Adobe, and Ulta Beauty are among those scheduled to release their quarterly reports.

Federal Reserve Chair Jerome Powell has emphasized the importance of gaining "confidence" in the downward trajectory of inflation before considering interest rate cuts. Tuesday's CPI reading follows a January report that showed a higher-than-expected inflation rate, leading investors to expect fewer interest rate cuts this year. Bloomberg estimates suggest that February's headline inflation will remain at 3.1% on an annual basis, while month-over-month prices are predicted to rise by 0.4%.

However, on a core basis, which excludes food and energy, economists expect a slower year-over-year increase of 3.7% compared to January's 3.9%. Month-over-month core prices are expected to rise by 0.3%, slightly lower than the previous month.

Despite concerns regarding inflation, economists at Wells Fargo do not believe that the underlying trend is strengthening, and expect the disinflation trend to persist. They anticipate the February data to reveal high but frustratingly stable inflation.

In terms of retail sales, January experienced the largest decline since March 2023. However, economists are hopeful for a rebound in February. They expect Thursday's report to show a 0.8% month-over-month growth in retail sales, excluding autos and gas. This would indicate an improvement from the decline seen in January.

Economists at Oxford Economics believe that the weather-related weakness in January and a stronger tax refund season will contribute to the rebound in retail sales. This could potentially lead to consumption growth exceeding 2% annually in the first quarter, which would be a robust pace.

The market saw a notable shift in trading action following Friday's jobs report, indicating a broader change in the market. After a period of AI-fueled stock market rally, tech giants like Nvidia, Arm Holdings, and Dell experienced significant drops. This divergence in performance, particularly from Apple and Tesla, could pave the way for a more diverse market rally.

The market rally's potential broadening was evident throughout the week, as the equal-weighted S&P 500 reached a record high not seen in over two years. Both the equal-weighted S&P 500 and the small-cap Russell 2000 index outperformed the broader market during Friday's sell-off.

Analysts and strategists across Wall Street have been calling for a broadening out of the market rally in 2024. The expectation is that increasing earnings estimates for stocks outside of the tech sector, coupled with a robust US economy, will drive the overall market performance.

JPMorgan's chief US economist, Michael Feroli, highlighted the strengthening labor market and increased the firm's outlook for second-quarter gross domestic product (GDP) to 1.5% annualized. This shift in economic forecasts is expected to positively impact company earnings across various sectors, not just in technology. As evidence of this trend, only a limited number of S&P 500 companies mentioned the term "recession" during their recent earnings calls, marking a two-year low and remaining below the five- and ten-year averages.

As Wall Street awaits the CPI report and other economic indicators, investors remain cautiously optimistic about the market's direction.