The robust performance of US stocks, fuelled by strong corporate earnings, may take a breather as investors shift their focus back to the Federal Reserve's monetary policy decisions following the conclusion of earnings season.

Nvidia Corp's stellar earnings report marked the pinnacle of the fourth-quarter reporting period, driving the S&P 500 index to reach new record highs in recent days. The benchmark index has surged over 6.7 per cent since the beginning of the year, supported by the impressive earnings growth of S&P 500 companies, which are on track to post a 10 per cent increase in fourth-quarter earnings compared to the same period last year.

However, as the excitement over earnings subsides in the coming weeks, attention is likely to return to macroeconomic indicators. One key factor that could influence market sentiment is the upward trajectory of bond yields, spurred by diminishing expectations of significant monetary policy easing by the Federal Reserve this year.

"The market has been able to ignore the rise in yields because of the strong earnings," noted Angelo Kourkafas, senior investment strategist at Edward Jones. "That focus on the path of rates and yields might come back into the forefront as we move past earnings season."

Rising Treasury yields typically exert pressure on equity valuations, making bonds more attractive relative to stocks and increasing borrowing costs for companies and consumers alike. The yield on the benchmark 10-year Treasury note climbed to 4.35 per cent earlier this week, its highest level since late November.

Despite the resilience of stocks amid rising yields, concerns may arise if inflation data continues to exceed expectations, prompting the Fed to postpone rate cuts further. Investors are closely monitoring Thursday's release of January's personal consumption expenditures price index, a key inflation gauge tracked by the Fed.

Looking ahead, the fervor surrounding artificial intelligence (AI) is expected to remain a driving force behind stock market performance. Nvidia's milestone achievement of reaching $2 trillion in market value underscores the immense demand for its chips, solidifying its position as a leader in the generative AI sector.

Additionally, upcoming economic data, including consumer confidence and durable goods reports, will offer further insights into the state of the economy. Retailers like Lowe's and Best Buy, scheduled to report earnings next week, will provide valuable insights into consumer spending trends.

Amidst these developments, investors like Jack Ablin, chief investment officer at Cresset Capital, see potential benefits if the economy continues on a trajectory toward a "soft landing," where the Fed successfully manages to curb inflation without derailing economic growth.

"If we can get slowing growth, slowing inflation, create an environment that the Fed can start reducing interest rates... that should help the average stock," Ablin remarked.

(With Reuters inputs)