With U.S. stock indexes on the cusp of a bear market, investors are awaiting the minutes of Wednesday’s U.S. Federal Reserve meeting to get more insight into the central bank’s response to soaring inflation. Retailer earnings will be in focus after last week’s disappointing results from major retailers shook a market already hard hit by concerns about inflation, interest rate hikes, geopolitical uncertainty surrounding the situation in Ukraine and the prospect of a recession. US personal income and spending data, which contains the Fed’s preferred measure of inflation, will be the main event on the economic calendar, while PMI data out of the eurozone and in the UK will also be under scrutiny. Here’s what you need to know at the start of the week.

1. FED PROTOCOL.

Investors are hoping Wednesday’s Fed minutes may provide some clues on whether the U.S. central bank can curb the most aggressive inflation in four decades without plunging the economy into recession.

Fed chief Jerome Powell is confident the central bank can achieve a “soft landing” for the economy, but Wall Street is not convinced the Fed can pull it off, warning of the prospect of a growing recession.

Goldman Sachs strategists forecast a 35% probability that the U.S. economy will enter a recession in the next 2 years, while Wells Fargo analysts expect a moderate recession in the country in late 2022 and early 2023.

The Fed has already raised the interest rate by 75 basis points since March, and the market expects another 50 basis point hike in June and July.

Powell has promised to raise the rate as high as necessary to keep inflation in check. The minutes will show how persistent inflation is expected to be and whether the economy is strong enough to withstand much tighter monetary policy.

2. RETAILER EARNINGS

Investors are bracing for earnings reports from Costco, Dollar General and Best Buy this week after disappointing results from major retailers last week crashed the stock market, heightening concerns about the economy’s prospects.

Walmart, the largest U.S. retailer and its rival Target, reported that while store traffic remains strong, inflation has begun to erode the purchasing power of the nation’s consumers.

While Wall Street brokerages expected rising fuel prices to cut into their profits, analysts said they were caught off guard by a rapid decline in consumer numbers and a shift to buying basic goods at lower margins instead of higher-margin consumer goods.

The extent of inventory accumulation and heavy discounting by retailers also came as something of a shock, analysts said.

3. HAS A BEAR MARKET SET IN?

Stock indices in the U.S. are on the cusp of a bear market, the onset of which is defined as a drop of at least 20% from the high at the close of trading.

The S&P 500 ended trading on Friday down 19% from its record closing high on January 3, while the Nasdaq has fallen more than a quarter from its November 2021 peak.

The market has been pressured by concerns about rising inflation, the Fed’s hawkish stance and the outlook for economic growth. The sell-off has been exacerbated by the conflict in Ukraine, which has sent oil and other commodity prices soaring.

Investors are looking at a variety of indicators to determine when the market will rise, including the CBOE Volatility Index, also known as Wall Street’s “fear indicator.” While the index is elevated from its long-term average, it is still below levels reached in other major sell-offs.

4. ECONOMIC DATA

On Friday, the U.S. will release personal income and spending data for April. The report also contains the Fed’s main gauge of inflation, the core price index for personal consumption expenditures. Economists expect the data to show that spending was stable last month despite high inflation.

The economic calendar also includes a report on durable goods orders, which economists expect to hold steady, as well as initial jobless claims data and revised first-quarter U.S. GDP data, which is expected to be slightly higher.

Meanwhile, new home sales data may indicate a cooling in the housing market as mortgage rates rise and consumers become more cautious.

5. PMI DATA.

This week, the UK and the Eurozone will release PMI data, which will be closely watched.

While Eurozone PMI data unexpectedly rose in April as services increased due to businesses reopening after the Omicron strain wave, this month’s data will shed more light on how long consumers will continue to spend on services when prices rise.

Meanwhile, Germany’s Ifo business climate index for May, due for release on Monday, is expected to show a decline.

And UK PMI data is expected to point to weaker demand in the services sector this month. Bank of England Governor Andrew Bailey is due to speak on Monday.