The United States (U.S.) stock market Wall Street is facing an important and challenging week ahead. It will be a significant test for the market as several key events are set to take place. Major companies are scheduled to announce their profits, and the Federal Reserve‘s Open Market Committee (FOMC) will convene to make decisions regarding interest rates. These developments are closely monitored, and they are accompanied by the highly anticipated jobs report.
Throughout the week, notable companies like Alphabet and Microsoft will reveal their earnings on Tuesday, followed by Apple and Amazon on Thursday. In between these days, there will be a crucial Fed meeting. The week will conclude on Friday with the release of the non-farm payrolls report and profits from Meta platforms.
The focus will primarily be on profits, as five out of the seven major tech stocks that have been driving the market’s performance in the past year will be reporting next week. Collectively, Alphabet, Microsoft, Apple, Amazon, and Meta represent about 25 percent of the S&P 500, making their performance influential to the broader index.
While most of these tech stocks have experienced growth in 2024, Tesla’s shares have declined by over 26 percent year-to-date, making it one of the worst performers in the S&P 500 this year. On the other hand, Nvidia, a chipmaker with a strong presence in artificial intelligence (AI), has gained nearly 23 percent this year.
Pressure on Fed
The Fed meeting, along with the subsequent decision and press conference by Chair Jerome Powell, will also have a significant impact on the markets. It is widely expected that the Fed will maintain interest rates at their current level, but investors will be looking for any indications regarding the central bank’s assessment of its measures against inflation and whether it may consider reducing borrowing costs in the future.
Moreover, market participants will be attentive to any potential changes to the quantitative tightening program, which has contributed to the tightening of monetary policy by reducing liquidity in the treasury market. Additionally, investors will eagerly await a speech from the Treasury Department, which will provide insights into its estimations of future funding and auction volumes. These updates are scheduled for Monday and Wednesday, respectively.
Read more: Meta stuns Wall Street with higher-than-expected profits
Employment data
The employment figures released during this week will be closely watched as they could indicate the impact of the 525 basis point interest rate increases implemented by the Fed since 2022. A significant decline in employment may suggest that these rate hikes are finally yielding results. Conversely, stronger-than-expected employment numbers could reinforce the argument for maintaining high interest rates to prevent a resurgence of inflation.
In recent weeks, there have been surprising signs of economic strength, which have caught investors off guard. Earlier data revealed that U.S. growth in the fourth quarter of 2023 exceeded expectations, with the economy expanding by 2.5 percent. These positive outcomes have defied previous forecasts of an impending recession.
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