Market Momentum Put to the Test
The S&P 500 has just wrapped up its strongest first four trading days under a new president since 1985, with a rally that has left investors wondering what’s next. The week ahead promises to be a busy one, with a slew of earnings reports from over 100 S&P 500 members, including tech giants Meta, Microsoft, Apple, and Tesla.
Earnings Season Heats Up
Starbucks, Exxon, and Chevron are also set to report, making Wednesday the busiest day of the week. Meanwhile, the Federal Reserve will announce its latest monetary policy decision, with investors eagerly awaiting Fed Chair Jay Powell’s comments on the balance of 2025.
A Comfortable Start to the New Administration
So far, the new president has had a significant impact on the stock market. Markets rallied on Tuesday after the dollar fell, and an AI investment announcement sparked a tech rally. Citi equity strategist Scott Chronert notes that implied volatility in rates, the US dollar, and oil have all moved lower, indicating a “cross-asset phenomenon” of reduced macro disruption.
Fed Announcement Takes Center Stage
On Wednesday, the Federal Reserve will release its latest policy decision, with markets pricing in a nearly 100% chance of steady interest rates. However, it’s Fed Chair Jay Powell’s press conference that’s likely to generate the most market volatility. Powell may adopt a more cautious approach, indicating that each Committee participant is using their own assumptions on trade policies.
Economic Data Takes Center Stage
Several key readings on the health of the US economy are also due out throughout the week. On Thursday, the first estimate of fourth-quarter GDP is expected to show a 2.6% annualized growth rate, while Friday will feature a fresh reading of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index.
Tech Stocks in the Spotlight
S&P 500 companies have had a strong start to earnings season, with the index expected to grow earnings by 12.7% in the fourth quarter. However, much of that growth still relies on the performance of the “Magnificent Seven” tech stocks, including Tesla, Meta, Microsoft, and Apple, which will report in the week ahead.
A Broadening Rally?
Equity strategists are calling for a broadening of the stock market rally outside of large-cap tech, as the earnings growth gap between the Magnificent Seven and other tech stocks is expected to narrow throughout 2025. However, given the large earnings growth expected for Big Tech, the group is likely to remain a critical EPS growth driver for the S&P 500.
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