NEW YORK, May 8 (Reuters) - The rallying U.S. stock market will take its cues next week from fresh inflation and consumer spending data, developments in the war in Iran, and a high-stakes meeting between the leaders of the U.S. and China.

U.S. equities have been on a tear, with the benchmark S&P 500 up more than 15% from its low for the year, hit in late March. The strongest U.S. quarterly earnings season in more than four years has lifted sentiment for equities, while worries about worst-case economic fallout from the Iran war have abated and investors are jumping in for fear of missing out on gains.

"We have seen this tremendous rebound as markets have willed themselves to focus on only the positive," said Kristina Hooper, chief market strategist at Man Group.

Hopes for an end to the Middle East conflict, which began in late February with U.S.-Israeli strikes on Iran, remain at the forefront for Wall Street. In particular, investors are eager to see a reopening of the Strait of Hormuz, a critical choke point for global oil supplies.

Energy prices have soared in the wake of the Iran war, with U.S. crude up more than 60% for the year.

"The continued progress towards a resolution for the U.S.-Iran war will be top of mind for investors," said Michael Arone, chief investment strategist at State Street Investment Management. "You need to begin to see ship movements in the Strait of Hormuz."

The war is also expected to be a topic when U.S. President Donald Trump meets with Chinese President Xi Jinping in Beijing late next week. Investors will monitor any developments between the two nations on access to rare earths and technology, as well as other issues.

STELLAR EARNINGS SEASON WINDING DOWN

The market's latest surge, which has pushed the S&P 500 up 7% for 2026 as of Thursday, builds on three consecutive years of double-digit returns. The technology-heavy Nasdaq Composite was last up 11% on the year, with both indexes hitting record levels.

While the first-quarter results season is winding down, corporate reports will remain a key driver for stocks in the coming days. Next week's results include tech networking equipment firm Cisco and semiconductor equipment maker Applied Materials. Heavyweights Nvidia and Walmart are due later in the month.

S&P 500 earnings are on track to jump 28% in the quarter, according to LSEG IBES data. Massive corporate spending on artificial intelligence is flowing through to the results of several industries, as AI hyperscalers build out data centers and other infrastructure to support the technology.

The results indicate that "all the fears that tariffs or this oil price shock would eat into margins have not materialized so far," Arone said. "Earnings are the lifeblood of this rally."

CPI SET TO SHOW WAR, ENERGY-PRICE IMPACT

Economic data covering April, especially on inflation, also could show the impact from the Iran war.

Tuesday's consumer price index - a closely watched inflation gauge - is expected to rise 0.6%, according to a Reuters poll. CPI rose 0.9% in March, the most in nearly four years, driven by a surge in gasoline prices.

With markets expecting a near-term resolution to the war, investors said they may focus on the CPI's core reading, which strips out energy and could offer clearer clues for projecting the path of interest rates. Following the war-related surge in energy prices, markets have ruled out equity-friendly rate cuts this year, and the latest Federal Reserve meeting indicated more hawkish sentiment from several policymakers. 

"If core CPI is significantly higher, I think that's going to be very problematic," Hooper said.

Other data next week include Wednesday's producer prices, which will offer another look at inflation trends, and Thursday's monthly retail sales, where investors will focus on how much higher gasoline and overall energy costs are eating into other types of consumer spending. This week, the national average price for gasoline topped $4.50 a gallon for the first time since July 2022.

"Even with oil bouncing around a bit and coming down from the highs, gasoline prices across the U.S. have just continued to move higher," said James Ragan, co-CIO and director of investment management research at D.A. Davidson. "We haven't had any relief there. I don't think there is a lot of evidence yet that it's hurting the consumer spending, but it's definitely a larger budget item."