TEST OF RISING MARKET

Earnings, Fed meet

The stock market’s strong start to the year faces a major test this week in a stretch packed with big tech earnings, the Federal Reserve’s monetary policy meeting and the closely watched employment report.

The S&P 500 is up nearly 3% since the end of December and stands near record highs, driven in part by expectations of an economic “soft-landing” in which growth remains stable while inflation cools.

A thicket of potentially market-moving events may test that optimism. Those include earnings from Alphabet and Microsoft on Tuesday; the conclusion of the Federal Reserve meeting on Wednesday; and Apple and Amazon results on Thursday. Friday closes out the week with the nonfarm payrolls report and earnings from Meta Platforms.

Through it all, “the market is going to be looking for confirmation that we’re in a soft landing,” said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions. “As long as growth remains in the sweet spot here . . . the market will keep grinding up.”

Earnings will be a major focal point, with five of the “Magnificent Seven” growth and technology stocks that have powered markets higher for much of the last year reporting next week.

Collectively, the market capitalization of Alphabet, Microsoft, Apple, Amazon and Meta accounts for nearly 25% of the S&P 500, giving them an outsize influence on the performance of the broader index.

While most of the group has continued to rise in 2024, shares of electriccarmaker Tesla are down more than 26% year-todate, leaving it among the worst performers in the S&P 500 so far.

By the same token, chipmaker Nvidia has ridden burgeoning excitement over artificial intelligence to a nearly 23% gain.

‘Event risk’

The Fed meeting and Fed Chairman Jerome Powell’s subsequent press conference could also sway markets.

Some investors are now reassessing earlier expectations for rate cuts this year following strong economic data and statements from Fed officials that suggested that rate cuts may not be as aggressive as expected, said Tiffany Wade, senior portfolio manager at Columbia Threadneedle Investments.

Investors have pushed expectations for the Fed’s first cut of the cycle to May, from March.

Overall, this week is “the largest ‘event-risk’ week ahead in recent memory,” wrote Nomura strategist Charlie McElligott.