Consumer inflation data and the start of the second quarter earnings season could be two catalysts that make for a bumpy ride in markets in the week ahead.

PepsiCo’s earnings are the first major report of the week Tuesday, and Delta Air Lines reports Wednesday. JPMorgan Chase and Morgan Stanley kick off bank earnings season Thursday, and Wells Fargo, Citigroup and PNC Financial, among others, follow on Friday.

A cluster of inflation reports could affect markets, since they help set the tone for how aggressive the Federal Reserve will have to be in its battle to calm inflation.

The June consumer price index looms large on Wednesday, and economists expect it could be hotter than May’s 8.6% year-over-year pace. It is also the report that could move markets most.

“The headline is expected to be higher. That’s mostly because of energy,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. He added that core inflation, excluding food and energy, could be lower. West Texas Intermediate crude futures were as high as $122 per barrel in June, but have since fallen back in July and were about $104 per barrel Friday.

“The question is to what extent the moderation in goods prices is going to be offset by continued increasing services prices, predominantly driven by rent,” Boockvar said. “The government stats still have a lot of catch up room to the upside on rent.”

There is also the June producer price index Thursday, and investors are closely watching Friday’s University of Michigan consumer sentiment report for July. That report contains consumer expectations about future inflation, an important metric watched by the Federal Reserve. June retail sales, another measure of the consumer, is also released Friday.

“PPI is the seed for CPI…and it could have another 10% handle,” said Boockvar.

The new inflation data comes on the heels of Friday’s strong employment report. In June, the economy added 372,000 jobs, about 120,000 more than expected. Strategists say the report reinforced expectations that the Federal Reserve will raise rates by another 75 basis points later this month. A basis point is one one-hundredth of a percentage point.

“It was enough to continue on the path they’ve chosen. It’s not until you start to see rising unemployment on a monthly basis that I believe the Fed will start to buckle its knees,” said Boockvar.

A key question for markets is when will inflation peak, as it has already continued to flare higher much longer than the Fed had initially anticipated.

“I do think a risk to the markets is this fact that inflation may not have peaked,” said Michael Arone, chief investment strategist at State Street Global Advisors. “I do still believe the markets are at least hopeful, if not expecting, that inflation will decelerate.”

As investors watch the pace of inflation, the second quarter earnings season begins. Corporate profits could be the source of some market turbulence, if analysts are force to chop estimates for the balance of the year, as many expect.

“The street has not really changed the estimates. Revenue growth has ticked down. Margins are compressing. Analysts are leaving their estimates unchanged,” said Boockvar. “If there’s going to be a readjustment, this is the time.”

Second quarter earnings for the S&P 500 are expected to grow by 5.7%, according to I/B/E/S data from Refinitiv. The third- and fourth quarter estimates have been moving down slightly, but are still 10.9% and 10.5%, respectively.

“I think the market is bracing for a challenging earnings quarter, so how much it will result in volatility is unclear,” said Arone. He said companies will continue to beat but maybe by not as much. “I think they will lower their guidance. Why not? It just makes it easier to beat down the road. I do think earnings season will be a disappointment. It will be interesting to see how the market reacts.”

Stocks in the past week were higher, with the S&P 500 on track for a 2.3% gain and the Nasdaq up 4.3%, as of Friday afternoon. Stocks were initially lower after the June jobs report but reversed course and rallied Friday.

The worst performing major sectors for the week were utilities and energy. The S&P consumer discretionary sector, which benefits from lower oil prices, bounced more than 4.3% on the week, as of Friday afternoon.

The 10-year Treasury note was yielding about 3.09% Friday, but the 2-year note yield surpassed the 10-year this past week for the third time since late March. The result is a so-called inverted yield curve, which does sometimes signal recession. The 2-year yield was at 3.11% Friday afternoon.

Week ahead calendar

Monday

1:00 p.m. $43 billion 3-year Treasury note auction

2:00 p.m. New York Fed President John Williams

Tuesday

Earnings: PepsiCo

6:00 a.m. NFIB survey

12:30 p.m. Richmond Fed President Thomas Barkin

1:00 p.m. $33 billion 10-year Treasury note auction

Wednesday

Earnings: Delta Air Lines, Fastenal

8:30 a.m. June CPI

1:00 p.m. $19 billion 30-year bond auction

2:00 p.m. Federal budget

2:00 p.m. Beige book

Thursday

Earnings: JPMorgan Chase, First Republic Bank, Conagra, Morgan Stanley, American Outdoor Brands, Cintas, Taiwan Semiconductor

8:30 a.m. Weekly initial jobless claims

8:30 a.m. June PPI

11:00 a.m. Fed Governor Christopher Waller

Friday

Earnings: Wells Fargo, Citigroup, PNC Financial, Bank of New York Mellon, U.S. Bancorp, State Street, UnitedHealth

8:30 a.m. June retail sales

8:30 a.m. Import prices

8:30 a.m. Empire state manufacturing

8:45 a.m. Atlanta Fed President Raphael Bostic

9:15 a.m. Industrial production

10:00 a.m. July consumer sentiment

10:00 a.m. Business inventories