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Stocks closed another week near all-time highs, as one of the busiest weeks of the quarter will greet investors.
Earnings from five of the “Magnificent Seven” tech stocks – Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META) – will highlight a week packed with quarterly reports. In total, 106 S&P 500 companies, including six Dow components, are scheduled to report in the coming week, according to FactSet.
On Wednesday afternoon, the Federal Reserve will announce its latest policy decision. Investors expect the central bank to leave interest rates unchanged in a range of 5.25% to 5.50%. Investors will be watching for any comments during Fed Chair Jerome Powell’s conference on Wednesday on when the Federal Reserve might begin cutting rates.
The January jobs report will be released on Friday, with economists expecting a modest reduction in job creation while unemployment is projected to remain stable at 3.7%.
Elsewhere on the calendar, key updates on activity in the manufacturing and services sectors of the economy, as well as the latest data on job openings, highlight the economic side of things.
Outside of the big tech companies, results from AMD (AMD), Starbucks (SBUX), Pfizer (PFE), CVX), Exxon Mobil (XOM) and Boeing (BA) lead the reporting calendar.
Stocks will enter the final week of the month near all-time highs. After a rough start to the year, both the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) are up more than 2% so far in January. Meanwhile, the Dow Jones Industrial Average (^DJI) is up more than 1%.
The market narrative has changed significantly since Jerome Powell last took the podium in December. Investors aggressively priced in a cut in March and then reduced those bets as economic growth continued to surprise to the upside.
But with inflation falling to its lowest levels in nearly three years, many Wall Street economists still believe the Federal Reserve will begin cutting in the near future.
“It is time for Fed officials to build on the victory and begin easing policy tightening soon,” Capital Economics deputy chief U.S. economist Andrew Hunter wrote in a note to clients on Friday. .
Investor bets are still mixed on when that cut will occur. As of Friday afternoon, markets had priced in a 47% chance that the Federal Reserve will cut rates in March. according to the CME FedWatch tool. Looking ahead to May, investors believe there is an 88% chance that rates will be lower at the end of that meeting.
Bank of America U.S. economist Michael Gapen expects the Federal Reserve to change its post-meeting statement to more neutral language on the restrictive nature of the policy, serving as “a de facto easing bias.” But he doesn’t think Powell and the central bank will show their faces just yet.
“Labor markets have cooled and inflation has fallen faster than expected in the absence of a big rise in unemployment, but we don’t think the Fed is ready to send a strong signal about its intentions just yet,” Gapen wrote in a note to clients on Friday.
Gapen believes the Federal Reserve will buy time to see more data. And some of that data will come in the days after the Federal Reserve meeting.
The January jobs report is scheduled to be released at 8:30 a.m. ET on Friday. And although layoffs have dominated the headlines in recent weeks, economists expect any signs of an overall labor market slowdown to remain absent from the data.
The report is expected to show that 175,000 nonfarm jobs were added to the U.S. economy last month due to unemployment. increasing slightly to 3.8%, according to Bloomberg data. In December, the US economy added 2,160,000 jobs, while the unemployment rate remained unchanged at 3.7%.
“In all, the themes of improving supply, cooling demand and general labor market normalization likely continued into January,” the Wells Fargo team of economists led by Jay Bryson wrote in a weekly note to clients. “While payroll growth has held up remarkably well recently, there are several signs of further moderation in the coming months. On net, fewer industries are adding staff each month and job openings and hiring plans continue to retreat.”
As if the economic calendar alone wasn’t enough to keep investors on their toes, the quarter’s biggest corporate earnings week will also set the stage for how companies are holding up amid the higher interest rate environment.
FactSet analysis on Friday shows the extent to which upcoming earnings could drive the market narrative. Excluding Tesla, the other “Magnificent Seven” tech stocks are expected to be the top six earnings drivers for the S&P 500, contributing to 53.7% year-over-year earnings growth. Excluding those six companies, the remaining 494 companies would report an earnings decline of 10.5%.
Five of those key companies (Alphabet, Microsoft, Meta, Amazon and Apple) will report next week.
Evercore ISI CEO Julian Emmanuel described the share price reaction to these reports as “critical to the overall direction of the market.”
Weekly calendar
Monday
Economic data: Dallas Fed Manufacturing Activity, January (-9.3 before)
Profits: Cleveland Cliffs (CLF) Phillips (PHG), SoFi Technologies (SOFI), Whirlpool (WHR)
Tuesday:
Economic data: S&P CoreLogic 20 cities NSA year over year (4.87% before); Conference Board Consumer Confidence, January (expected 112.5, previously 110.7) JOLTS job openings, December (8.79 million before); Dallas Fed services activity, January (-8.7 before)
Profits: Advanced Micro Devices (AMD), Alphabet (GOOGL), Electronic Arts (EA), General Motors (GM), JetBlue (JBLU), Juniper Networks (JNP), Match Group (MTCH), Marathon Petroleum Corporation (MPC), Microsoft ( MSFT), Pfizer (PFE), Starbucks (SBUX), UPS (UPS)
Wednesday
Economic data: MBA Mortgage Applications, week ending January 26 (3.7%); ADP Private Payrolls, January (+150,000 expected, +164,000 before); Employment cost index, fourth quarter (expected 1.0%, previously 1.1%) Federal Reserve monetary policy decision (no change in interest rates expected)
Profits: Aflac (AFL), Boeing (BA), Hess (HES), Mastercard (MA), MetLife (MET), Novo Nordisk (NVO), Phillips 66 (PSX), Qualcomm (QCOM)
Thursday
Economic data: Challenging job cuts, year over year, January (-20.2% before); Unit labor costs, fourth quarter (+2.6% expected, -1.2% before); Non-farm productivity, fourth quarter (+1.6% expected, +5.2% before); Initial unemployment claims, week ending January 27 (214,000 before); S&P US Global Manufacturing PMI, end-January (previously 50.3); Construction spending, month over month, December (+0.5% expected, 0.4% before); ISM manufacturing, January (expected 47.5, previously 47.2); ISM prices paid, January (45.2 before)
Profits: Apple (AAPL), Amazon (AMZN), Deckers Brand (DECK), Honeywell (HON), Meta (META), Merck (MRK), Royal Caribbean Group (RCL), Peloton (PTON), SiriusXM (SIRI), Skechers ( SKX), Tractor Supply (TSCO), The Clorox Company (CLX), United States Steel (X)
Friday
Economic calendar: Nonfarm Payrolls, January (+175,000 expected, +216,000 before); Unemployment rate, January (expected 3.8%, previously 3.7%); Average hourly earnings, month over month, January (+0.3% expected, +0.4% before); Average hourly earnings, year over year, January (+4.1% expected, +4.1% before); Average weekly hours worked, January (expected 34.4, previously 34.3); Labor force participation rate, January (62.5% previously); U. of Michigan sentiment, end of January (expected 78.8, previously 78.8); Factory orders, December (+0.5% expected, 2.6% before); Durable goods orders, end of December (0.0% before)
Profits: Chevron (CVX), Exxon Mobil (XOM), Charter Communications (CHTR)
Josh Schafer is a Yahoo Finance reporter. Follow him on X @_joshschafer.
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