Everyone is expecting big earnings. With 20 percent earnings growth, the risk is to the downside. We saw this on Friday, when banks delivered in-line reports, but their stocks sold off. That trend reversed on Monday, a sign that this is not a broad worry about earnings peaking, at least not yet.

Still, it’s definitely harder to impress investors: The bar is much higher now. The good news is there is clearly a floor under the market with trade issues, and perhaps Syria, calming down.

Then there is the Fed. The big issue, it seems to me, is interest rates. With volatility back down, we’ll see if rates start moving up. We seem to be only one or two nasty inflation reports away from the markets making it a big worry once again.

UBS’ Art Cashin agrees: “Part of that has to do with what you believe is happening with the Fed, and we’re seeing some hints that inflation is moving up,” he told CNBC. “If the Fed turns more aggressive, that will hold back the earnings picture.”

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The Fed itself seems conflicted on inflation. Dallas Fed President Rob Kaplan said Monday that “cyclical inflationary pressures are building,” but he also noted that corporations still lack pricing power.

There’s even less consensus on whether there is still a “Fed put” under the market, a belief that the Fed will step in and aggressively cut rates if the economy weakens. My sense is that there is not, that Fed Chairman Jerome Powell will not be as quick to cut rates as Janet Yellen.

Instead, we may be morphing into some new form of Fed “protection.” There is some limit on the downside, but there may also be a cap on the upside. By that I mean the Fed will keep raising rates, but if things go bad, it will definitely slow the pace of increases.

That’s not a “put,” but it does seem to place the market in some kind of box. Perhaps we will test the markets with surprisingly strong earnings pushing us toward new highs, but the Fed hiking may prevent that from happening.

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That seems a likely scenario.



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