NEW YORK, May 9 (Reuters) - Investors head into a busy

week for economic data watching if leadership in the U.S. stock

market could be moving away from defensive equity areas that

indicates greater appetite for risk.

While the benchmark S&P 500 index is down 3.7% in

2025, with stocks jolted by concerns about economic damage from

President Donald Trump's tariffs, the consumer staples

and utilities sectors, typically seen as more

safe-haven areas of the market, are up this year 5% and 5.6%,

respectively.

Investors often seek shelter in those groups because their

businesses are considered relatively immune to economic

slowdowns while the stocks tend to offer strong dividends.

"If the market is in a risk-off mode, those sectors will

continue to lead," said Chuck Carlson, chief executive officer

at Horizon Investment Services.

More recently, however, as the U.S. market has rebounded

from its lows over the past month, groups like technology,

industrials and consumer discretionary that are more associated

with upbeat economic sentiment, or "risk on" investor behavior,

have been outperforming.

Leadership moving from defensive sectors to those areas or

groups tied to the economy such as financials or energy could be

"a sign perhaps that investors are regaining some animal spirits

with regard to the prospects for the economy," said Mark

Luschini, chief investment strategist at Janney Montgomery

Scott.

"That would be a tell of less caution being insinuated by

investors," Luschini said.

While data so far this year has indicated resilience in the

economy, sentiment surveys and other "soft data" have been weak.

"What all macro investors are grappling with is, is this

just a sentiment slowdown that's being reflected in a defensive

tilt within equities, or is this something more fundamental?"

said Matthew Miskin, co-chief investment strategist at Manulife

John Hancock Investments.

Economic data in the coming week provides a critical view.

Tuesday's April consumer price index will give a fresh read on

inflation trends, while April retail sales on Thursday offers

the latest window into consumer spending.

While economic fallout from the tariffs remains unclear,

concerns abound that the import levies are poised to drive up

prices and slow growth.

If CPI is hotter than expected and retail sales miss

estimates, it could raise concerns about "stagflation," Miskin

said - a mix of sluggish growth and relentless inflation that

could pressure stocks.

Some investors said the Federal Reserve appeared to nod to

such worries at its meeting this week. The central bank held

interest rates steady and said the risks of both higher

inflation and unemployment had risen.

Aside from data, the coming week will see more U.S.

companies posting quarterly results, including retailing giant

Walmart ( WMT ), whose report stands to offer insight into

consumer behavior and the cost of imported goods.

Stocks gained on Thursday after Trump and British Prime

Minister Keir Starmer announced a trade agreement, the first

since Trump triggered a global trade war with a barrage of

levies on trading partners.

Investors will continue to be fixated on the Trump

administration's negotiations with other countries in hopes of

more agreements after the president last month paused many of

the heftiest tariffs for 90 days.

"Talks are starting to take place globally, and there is

increased optimism that deals can be made before" the pause

expires, CFRA strategists said in a note on Wednesday.