NEW YORK, May 22 (Reuters) - High-flying U.S. equities could face turbulence in the final days of a blowout corporate earnings season as investors confront an increasingly tricky backdrop of spiking inflation and rising bond yields.

The benchmark S&P 500 wobbled this week but remains less than 1% below its all-time high, up more than 8% for the year. Strength in earnings has allowed investors to look past negative factors such as higher yields, surging oil prices and the ongoing U.S.-Israeli war with Iran, said Anthony Saglimbene, chief market strategist at Ameriprise, but "company reporting is kind of done now."

"Investors are moving beyond the earnings season, and the macro environment is starting to take more center stage," Saglimbene said, ahead of a shortened trading week due to the Memorial Day holiday on Monday.

A selloff in the bond market has Wall Street on edge. The benchmark 10-year Treasury yield this week hit its highest level since January 2025, while the 30-year yield touched its highest since 2007. Yields, which rise as bond prices fall, pose headwinds for stocks as they increase rapidly, including by pressuring valuations and translating into higher borrowing costs for consumers and businesses.

Major factors driving yields higher have been inflationary worries and war-related energy price spikes.

"Inflation concerns continue to flare," said Jim Baird, chief investment officer with Plante Moran Financial Advisors. "You're seeing upside in long-term Treasury yields that is kind of challenging the bond market and probably puts a practical lid on equities broadly if it persists for some period of time."

US INFLATION MEASURE ON TAP

A view of inflation is due on Thursday with the April reading of the personal consumption expenditures price index. The release of PCE, the measure favored by the Federal Reserve for setting its 2% annual inflation target, follows hot readings this month for other gauges of consumer and producer prices. 

"It will be another data point that likely shows that months of elevated oil prices and supply disruptions are starting to feed through into inflation data," Saglimbene said.

Inflation worries are increasingly filtering into expectations for interest rates. Futures markets now price in the potential for a rate hike by the Federal Reserve later in 2026. At the start of this year, markets were banking on more equity-friendly rate cuts.

Minutes released this week from the Fed's latest policy meeting showed officials growing more concerned that price spikes during the U.S.-Israeli war on Iran could stoke inflation. A growing number were open to the possibility that they may need to raise rates.

"At best, I'd say you're now in more of an extended pause scenario with the potential for a turn to rate hikes later this year if the inflation story continues to heat up," Baird said.

Other economic data in the coming week include a fresh estimate of first-quarter growth and the latest consumer confidence print. 

COSTCO, SALESFORCE ENDING A STANDOUT Q1

With more than 90% of S&P 500 companies having reported results, overall first-quarter earnings are on track to have jumped more than 28% from a year earlier, according to LSEG IBES data.

"I would say expectations for earnings and economic growth are pretty high," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. "That's built into where stock prices are right now."

Several key retailers will report in the coming week, including Costco, Best Buy ( BBY ) and Dollar Tree ( DLTR ), as investors look for signs that elevated gas prices might be eating away at other consumer spending. Walmart ( WMT ) shares slumped on Thursday after the retailing bellwether stuck to its conservative annual sales and profit targets.

AI, which has been a key driver of stocks and earnings growth, will also be in focus with results from cloud software provider Salesforce ( CRM ) and Dell Technologies ( DELL ), which sells servers.

Chipmaker Nvidia, whose results are considered a barometer for the AI market's health, on Wednesday forecast second-quarter revenue of $91 billion, surpassing Wall Street's estimates. 

Nvidia's ( NVDA ) "results help reinforce that robust AI-related spending trends remain intact," Brock Weimer, investment strategy analyst at Edward Jones, said in emailed commentary.