Trade negotiations are getting closer to the finish line as markets weigh inflation data and profits in the coming week

A trade deal between the US and China could be a powerful catalyst for equities, even though analysts say the market would have already accounted for a large part of the gains.

Chinese Vice Premier Liu He will visit Washington for talks next week. Sources told CNBC that an agreement would be possible by Friday. Trade was one of the largest surpluses in the market, but the prospect of successful negotiations contributed to the 17% growth of the S & P 500 this year.

In addition to trading in the coming week, investors are waiting for Friday's inflation data, which is important after the comment by Federal Reserve Chairman Jerome Powell that low inflation is transitory, indicating that the Fed should not consider a reduction in interest rates.

This comment by the Fed chief has made the markets shudder, because many investors have positioned themselves in both bonds and equities to obtain a preventive reduction of interest rates from the Fed. Thus, Friday 's consumer price index will be decisive, although, unlike the measure of inflation monitored by the Fed, the CPI is expected to post slightly higher inflation than the US – led index. 2% target set by the Fed in April. The Fed's preferred PCE deflator posted core inflation of 1.6% in the first quarter.

To close its jobs this week, the April employment report has crushed Wall Street's expectations, adding 263,000 new hires while the unemployment rate has dropped to 3.6%, its level the highest. lowest in a generation, said Friday the Department of Labor. Wall Street was expecting 190,000 hires and an unemployment rate of 3.8%.

"The more robust the incoming data, the longer the Fed has the time to sit down and watch and assess if inflation is rising as it thinks this year." If the job market is strong enough Well, it allows the patient's Fed, and let that thing play, "said Michael Gapen, chief US economist at Barclays. Gapen said that if data and inflation falter instead, the Fed should rethink its position later in the year.

Profits will continue to be a determining factor in the coming week, with around 50 S & P 500 companies, including media names such as Disney, News Corp and Viacom.

But if trade negotiations are resolved, it will be the event that could have consequences for the markets and the economy for the coming months.

But the reaction on the stock market may seem initially short-lived. "If tariffs go down, you may be able to adjust your income expectations, so you may have some nice days, but I think three-quarters of the price is there, maybe a little bit more," said Lori Calvasina. , chief US equities strategist at RBC.

She said some sectors had already benefited from the prospects of an agreement. "The two priorities, I think, are the industrials and the semi-finals," she said. As for semiconductors, "there was such a violent rally this year, seedlings were sort of the game of Chinese fears and they rallied hard and fast, and they start making profits."

The VanEck Vectors Semiconductor ETF is up 33.4% since the beginning of the year.

Calvasina said the better-than-expected performance of the first-quarter earnings of the S & P 500 index shows that the recession should not occur just a month ago. She added that companies put a lot of emphasis on reducing costs to maintain their margins. According to Refinitiv, companies in the S & P 500 should now see earnings growth of about 0.7%, compared to a 2% contraction expected on April 1st.

"I think the market deserves a lot of the rally we had," she said. However, she sees only limited prospects and maintains a target of 2,950 on the S & P for the end of the year. "We are coming to the part of the year when we are vulnerable to bad news.This does not mean that today is the summit, but when we think about what we are going to be in the end year, it's a good reason not to raise the target.We have the feeling that we can exceed short-term goals. "

"It's probably the right time to pull money out of the table, we said things could weigh on the market in the second half," she said.

Investors are also turning to Omaha this weekend. Berkshire Hathaway was holding its annual meeting this Saturday and that could make a lot of headlines for investors watching Warren Buffett. The investor has already revealed Thursday to CNBC that his company was a buyer of Amazon.

On Monday

Results: Western Oil, Sysco, Tyson Foods, Bausch Health, AIG, Frontier Natural Resources, Hertz Global, Liberty Global, KLA-Tencor, Bloom Energy, Assurant, Everest Re, Iamgold

Charles Evans, President of the Chicago Fed, 6 am

Patrick Harker of the Philadelphia Fed at 9:30

2:00 p.m.. Survey of Senior Loan Officers

Tuesday

Earnings: A-B Inbev, Electronic Arts, TripAdvisor, Petrobras, Diamondback Energy, Mylan, SeaWorld, Allergan, Ambiance, Emerson, Regeneron, Cinemark, All American Plains, Papa John's, Sempra Energy, Match Group, Wingstop

10am JOLTS

3:00 p.m.. Consumer credit

Wednesday

Earnings: Disney, Fox Corp., Madison Square Garden, Wendy's, Hostess Brands, Marathon Petroleum, Royal Ahold, Gold Barrick, Bunge, Acushnet, McKesson, Switch, IAC / Interactive, Honda Engine, Toyota Motors, Siemens

Thursday

Earnings: News Corp, Booking Holdings, Keurig Dr. Pepper, Tapestry, Norwegian Cruise Line, Becton Dickinson, Duke Energy, CenterPoint, Canadian Natural Resources, Cardinal Health, ArcelorMittal, Azul, Hain Celestial, AMC Enertainment, TrueCar, Axa Equitable, Vale, Equal, Zillow, Yelp

8:30 International Trade

8:30 am Unemployment claims

8:30 pm PPI

10:00 am Wholesale trade

10:45: Raphael Bostic, president of the Atlanta Fed

1:15 pm: Evans from the Chicago Fed

Friday

Earnings: Viacom, Marriott, Media Tribune, Telefonica, Buckeye Partners, JD.com

8:30 am CPI

9:00 am Atlanta Fed de Bostic

10:00, New York Fed President John Williams

2:00 p.m.. Federal budget