* PCE inflation gauge due on Thursday

* Salesforce ( CRM ), Costco, Best Buy ( BBY ) among reports due as

robust Q1 comes to end

* Bond market selloff in view as Treasury yields hit

milestones

By Lewis Krauskopf

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.