US stocks extended their gains on Wednesday after reports showed that US inflation hit its highest level in four decades. It was roughly in line with market expectations and traders held their bets on rate hikes in March.

Commodities, retail and tech stocks led the growth in S&P 500, with Tesla and Alphabet pacing a rally in megacaps. Meanwhile, financial stocks showed the worst results, and large Wall Street banks are set to report their results on Friday.

Although the US economy grew at a modest pace in the final weeks of last year, business expectations for the next few months eased in some places. The Fed said this in its Beige Book released yesterday.

"Bond markets are currently pricing in about a 90% probability that the Fed delivers four rate hikes in 2022," said Jai Malhi, global market strategist at JP Morgan. "Today's inflation data should not dissuade the central bank from delivering the first of those hikes in March," he added.

Oanda senior market analyst Edward Moya also commented that "Wall Street was worried that a much hotter inflation report could have not only cemented four Fed rate hikes this year, but potentially made the May FOMC meeting a possibility for when the balance-sheet runoff could start."

"Fears about higher and persistent inflation have been well telegraphed in recent months. Today's rise in the rate of inflation falls within investors' expectations," added Richard Flynn, managing director at Charles Schwab U.K.

Other news to watch out for this week are:

- US PPI and jobless claims (Thursday);

- hearing on Lael Brainard's candidacy as Fed vice chairman (Thursday);

- speech of Fed presidents Thomas Barkin, Patrick Harker and Charles Evans (Thursday);

- policy decision of the Bank of Korea (Friday);

- corporate sales report from Wells Fargo, Citigroup and JPMorgan (Friday);

- US data on business stocks, manufacturing, consumer sentiment and retail sales (Friday);

- speech of New York Fed President John Williams (Friday).