U.S. Stocks Brace for Major Earnings Slate, Fed Policy Decision

U.S. markets are heading into a critical week, with a Federal Reserve policy meeting and a deluge of corporate earnings set to provide a major test for equities. The focus comes after a mixed weekly performance that saw a tech-led selloff on Thursday spread to the broader market by Friday's close.

Weekly Market Recap

Last week, the S&P 500 and Nasdaq Composite posted modest losses of 0.5% and 0.7%, respectively, while the Dow Jones Industrial Average managed a slight gain of 0.4%. The week ended on a weaker note, with the Dow falling 652.82 points, or 1.23%, on Friday.

The downturn was influenced by several factors, including a pullback in technology stocks as investors assessed the impact of higher borrowing costs on AI-related investments. The 10-year Treasury yield hovered near the key 5% level, while U.S. oil prices climbed above $100 a barrel amid geopolitical concerns, according to Investing.com.

Pivotal Week Ahead

Investors face two major catalysts this week that could determine the market's near-term direction: a packed earnings calendar and a central bank policy decision.

Ad

• Corporate Earnings: Roughly a third of S&P 500 companies are scheduled to report quarterly results. The spotlight will be on technology giants Alphabet, Microsoft, and Amazon, whose results will be closely scrutinized for insights into the AI spending boom and cloud computing growth. Other notable reports are expected from chipmaker Intel, energy majors Exxon Mobil and Chevron, and bellwethers like Eli Lilly and Mastercard.
• Federal Reserve Meeting: The Fed concludes its policy meeting on Wednesday. While the central bank is widely expected to hold interest rates steady, its forward guidance will be key. According to LSEG data, fed funds futures imply less than a 10% probability of a rate hike this week, though the odds for a hike at the December meeting are seen at approximately 80%.

Market Context

This year's stock market gains have been largely supported by strong corporate profit growth, which has helped offset headwinds from surging Treasury yields and rising energy prices. The upcoming earnings reports will be a crucial test of whether that earnings strength can continue to underpin equity valuations.

Sentiment around the artificial intelligence theme, a primary driver of the 2024 rally, will be particularly sensitive to the outlooks provided by major tech and semiconductor firms. Any signs of slowing investment or weaker-than-expected guidance could add to the market's recent fragility.