NEW YORK, May 10 (Reuters) - A strong earnings season

and blockbuster reports from tech industry titans fueled a U.S.

stock market rebound from the first real swoon of 2024. Next

week's inflation data could determine whether the good vibes

continue.

The benchmark S&P 500 index is up over 9% for the

year, up near its late-March record high, following a 5%

pullback that occurred last month.

The bounce has overlapped with a stronger-than-expected

first-quarter reporting season for U.S. companies. With well

over 80% of the S&P 500 having reported results, companies are

on track to have increased earnings by 7.8%, well ahead of the

April expectation of 5.1% growth, according to LSEG IBES.

Still, some investors worry the rally could stall without

evidence that inflation is cooling again. While Fed Chairman

Jerome Powell has reassured markets the central bank is unlikely

to raise rates anytime soon, months of strong inflation have led

to concerns that policymakers will not cut them this year.

Strong earnings have "got investors feeling more comfortable

about being in this market," said Art Hogan, chief market

strategist at B Riley Wealth. However, "the trajectory of

inflation is always going to be important to us while we're in a

cycle where we expect the next thing for the Fed to do is to cut

rates."

Inflation reports have preceded market pivots in recent

years, as the Fed has ramped up interest rates to cool consumer

inflation from four-decade highs hit in 2022. Most recently, an

April 10 release showing a third-straight month of

stronger-than-expected inflation was followed by a roughly

two-week decline in stocks as it spurred fears the Fed could

raise rates this year.

Economists polled by Reuters expect the May 15 consumer

price index report will show an increase of 0.3% in April from

the previous month. Investors are also awaiting data on retail

sales next week, as well as earnings from Walmart ( WMT ), Home

Depot ( HD ) and Cisco ( CSCO ).

"If the CPI report comes in hotter, it's going to likely

price out any rate cuts for 2024," said Matthew Miskin, co-chief

investment strategist with John Hancock Investment Management.

"You may actually have to start talking about policy that's more

restrictive if (inflation) is too hot relative to expectations."

BOOST FROM EARNINGS

For now, bullish investors have gained confidence from a

solid earnings season. Standouts included generally strong

reports from most of the so-called Magnificent Seven tech and

growth giants whose shares helped propel the market higher last

year and continue to have a huge weighting in the S&P 500.

Among these, Alphabet announced its first dividend

as the Google parent topped estimates for sales and profit,

while Apple's ( AAPL ) revenue fell less than feared as the

iPhone maker unveiled a $110 billion stock buyback plan, the

largest ever such authorization from a U.S. company.

"There's been enough in terms of upside surprise that's

helped to support the markets," said Yung-Yu Ma, chief

investment officer at BMO Wealth Management. "There was concern

that it could even be somewhere between a modest and weak

earnings season, which didn't happen."

With Nvidia ( NVDA ) the last of the group to report, on May

22, Magnificent Seven quarterly earnings are on track to jump

49.4%, according to Tajinder Dhillon, senior research analyst at

LSEG.

Analysts are also becoming more upbeat about megacap

financial prospects. Estimates for 2024 earnings for the six

megacap companies that have reported have risen by 2.1% on

average over the past 30 days, versus only a 0.1% rise in 2024

earnings estimates for the S&P 500 overall, according to Jessica

Rabe, co-founder of DataTrek Research.

Still, investors have punished companies whose results

missed expectations. These shares have underperformed the market

by 3.2% this quarter, compared to 1.2% the previous quarter,

according to a report from Manish Kabra, chief U.S. equity

strategist at Societe Generale.

That reaction is "not a major surprise, as this season

overlapped with bond market volatility and a strong performance

in the run up to reporting," Kabra said.