Citi Research reiterated its 5,100 year-end target for the S&P 500 (^GSPC). With so many corporate earnings coming in overly positive, results have reaffirmed Wall Street's beliefs that the market will see potential rallies in conjunction with a soft landing scenario for the economy.

Citi Research Head of US Equity Strategy Scott Chronert joins Yahoo Finance to discuss the call and gives insights into how equities could move on economic data.

Chronhert affirms: "The way we've been framing it is that we have had this strong rally, let's call it since the beginning of November, which is in response to Ten-Year yields coming down from 5 to as low as 3.8%. What that has done is increased a soft landing profile around the broader market set-up, but what's happened is that move has come before we've actually seen a more defined earnings turn in many more cyclical parts of the market, including the consumer side. So, essentially, what we're suggesting here is that... ten-year nominals become your really important interest rate benchmark to keep an eye on..."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

RACHELLE AKUFFO: Well, also looking at Citi reiterating its S&P 500 year-end target as 5,100 this week. The firm noting earnings as a positive surprise trending above average. This week, we had Mohamed El-Erian, Allianz chief economic advisor. Here's what he had to say on what traders should be watching.

MOHAMED EL-ERIAN: Earnings call, I listen really carefully to earnings call. You can start putting an image together by listening to different earnings calls and what they're telling you about what they are seeing. Company is at the forefront and they have a much better sense of what's going on the ground at turning points. And this could be a turning point. So listen carefully to what companies are telling us.

RACHELLE AKUFFO: Well, we have the analysts behind that call, Scott Chronert, Citi research head of US equity strategy here. Good to see you. So obviously, still seeing this frothiness in the market this morning with every bit of economic data that comes out. Walk us through this bullish call you have for the S&P hitting 5,100.

SCOTT CHRONERT: So I mean, we've been bullish going back to the middle part of last summer's. It had been predicated essentially on gradually getting to a point where we get a changing Fed narrative and we move away from the hawkish dynamic of the past year or longer to something that's let's call it less restrictive. Now, at the same time, we've been arguing for some time this messaging on earnings resilience, that we felt that even in a mild recession scenario, S&P 500 fundamentals would hold up better than typically perceived. We've been getting that. And so we think that mantra constructive on fundamentals, even through an economic cycle, really underscores our more positive view.

MADISON MILLS: Well, Scott, it's great to speak with you because we just got this University of Michigan sentiment data kind of adding to the inflation gloom just a touch, signaling that the consumer is still concerned about the inflation picture. And that comes after a week of hotter than expected data. So I'm curious to what extent do you think that the market is sort of mispricing this continued question mark in the room about whether or not the Fed actually has tackled inflation and they can start to discuss a pivot?

SCOTT CHRONERT: I think it's the million dollar question right now. You're spot on on this. So the way we've been framing it is that we've had this strong rally, let's call it since the beginning of November, which is in response to 10-year yields coming down from 5 to as low as 3.8.

What that has done is really increased the soft landing profile around the broader market setup. But what's happened is that that move has come before we've actually seen a more defined earnings turn in many more cyclical parts of the market, including the consumer side. So essentially, what we're suggesting here is that 10-year nominals become your really important interest rate benchmark to keep an eye on, in our view, more so than Fed funds. We think we're going to get the Fed funds pivot eventually, but again, what we're arguing here is that equities are really going to respond to a lower 10-year nominal, which is what we're not getting courtesy of some of the macro data today.