Stocks closed another week near record highs as one of the busiest weeks of the quarter looks set to greet investors.
Results from five of the “Magnificent Seven” tech stocks – Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META) – will culminate a packed week of quarterly reports. According to FactSet, a total of 106 S&P 500 companies, including six Dow components, are expected to report in the coming week.
The Fed will announce its latest monetary policy decision on Wednesday afternoon. Investors expect the central bank to keep interest rates unchanged in a range of 5.25% to 5.50%. Investors will be paying close attention to comments about when the Federal Reserve might begin cutting interest rates during Fed Chair Jerome Powell's conference call on Wednesday.
January's jobs report is due to be released on Friday, with economists expecting a slight decline in job additions while unemployment is expected to remain stable at 3.7%.
Elsewhere in the schedule, key updates on activity in the manufacturing and services sectors of the economy, as well as the latest job vacancies data, illustrate 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) are at the top of the reporting calendar.
Stocks will enter near all-time highs in the final week of the month. After a rocky start to the year, both the S&P 500 (^GSPC) and the Nasdaq Composite (^IXIC) are up over 2% so far in January. Meanwhile, the Dow Jones Industrial Average (^DJI) rose more than 1%.
Since Jerome Powell last took the podium in December, the market narrative has changed significantly. Investors aggressively priced in a cut in March and then scaled back those bets as economic growth continued to surprise on the upside.
But with inflation down to its lowest level in nearly three years, many Wall Street economists still believe the Fed will begin cutting interest rates in the near future.
The story goes on
“It is time for Fed officials to win and begin scaling back the level of restrictive policy soon,” Andrew Hunter, deputy chief U.S. economist at Capital Economics, wrote in a note to clients on Friday.
Investor bets on the timing of this cut are still mixed. As of Friday afternoon, markets had priced in a 47% chance that the Fed would cut interest 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 by the end of this session.
U.S. economist Michael Gapen of Bank of America expects the Fed will change its statement after the meeting to more neutral language on tightening policy, serving as a “de facto easing bias.” But he doesn't think Powell and the central bank will completely give up their hand just yet.
“Labor markets have cooled and inflation has fallen faster than expected without a sharp rise in unemployment, but we do not believe the Fed is ready to send a strong signal about its intentions yet,” Gapen wrote in a note to clients on Friday.
Federal Reserve Board Chairman Jerome Powell arrives for a news conference following a closed two-day meeting of the Federal Open Market Committee on interest rate policy at the Federal Reserve in Washington, U.S., December 13, 2023. Portal/Kevin Lamarque (Portal / Portal )
Gapen believes the Fed will buy time to see more data. And some of that data will be available in the days following the Fed meeting.
The January jobs report is scheduled to be released Friday at 8:30 a.m. ET. And although layoffs have dominated headlines in recent weeks, economists expect no signs of a broader labor market slowdown to be found in the data.
The report is expected to show that unemployment added 175,000 non-farm payroll jobs to the U.S. economy last month The increase rose slightly to 3.8%, according to data from Bloomberg. In December, the US economy added 2,160,000 jobs while the unemployment rate remained unchanged at 3.7%.
“Overall, the themes of improving supply, slowing demand and general labor market normalization are likely to continue in January,” Wells Fargo's team of economists led by Jay Bryson wrote in a weekly note to clients. “Although wage growth has held up remarkably well recently, there are several signs of further moderation in the coming months. The bottom line is that fewer industries are increasing their headcount each month and job openings and hiring plans continue to decline.”
As if the economic calendar alone wasn't enough to keep investors on their toes, the week of the quarter's biggest corporate earnings will also lay the foundation for how companies fare in a higher interest rate environment.
FactSet's analysis on Friday shows how much the upcoming earnings could influence the market narrative. Excluding Tesla, the other Magnificent Seven tech stocks are expected to be the six biggest earnings drivers for the S&P 500, contributing 53.7% year-over-year earnings growth. Without these six companies, the remaining 494 companies would see a 10.5% decline in profits.
Five of these key companies – Alphabet, Microsoft, Meta, Amazon and Apple – will report next week.
Julian Emmanuel, managing director of Evercore ISI, described the share price reaction to these reports as “crucial to the overall market direction.”
Weekly calendar
Monday
Economic data: Dallas Fed Manufacturing Activity, January (-9.3 previous)
Merits: Cleveland Cliffs (CLF) Phillips (PHG), SoFi Technologies (SOFI), Whirlpool (WHR)
Tuesday:
Economic data: S&P CoreLogic 20 Cities YoY NSA (4.87% prior); Conference Board Consumer Confidence, January (112.5 expected, 110.7 forecast) JOLTS job openings, December (8.79 million previously); Dallas Fed Services Activity, January (-8.7 previous)
Merits: 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 Jan. 26 (3.7%); ADP Personal Payrolls, January (+150,000 Expected, +164,000 Previous); Labor Cost Index, fourth quarter (1.0% expected, 1.1% previous) Federal Reserve monetary policy decision (no rate change expected)
Merits: Aflac (AFL), Boeing (BA), Hess (HES), Mastercard (MA), MetLife (MET), Novo Nordisk (NVO), Phillips 66 (PSX), Qualcomm (QCOM)
Thursday
Economic data: Challenger Job Losses, YoY, January, (-20.2% Previous); Unit labor costs, fourth quarter (+2.6% expected, -1.2% previous); Non-farm productivity, fourth quarter (+1.6% expected, +5.2% previous); Initial jobless claims, week ending January 27 (214,000 previously); S&P Global US Manufacturing PMI, January final (50.3 previous); Construction spending month-on-month, December (+0.5% expected, 0.4% previous); ISM Manufacturing, January (47.5 expected, 47.2 expected); ISM prices paid, January (45.2 before)
Merits: 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: Non-farm payrolls, January (+175,000 expected, +216,000 previous); Unemployment rate, January (3.8% expected, previously 3.7%); Average hourly wage month-on-month, January (+0.3% expected, +0.4% previous); Average hourly wage year-on-year, January (+4.1% expected, +4.1% previous); Average weekly hours worked, January (34.4 expected, 34.3 previous); Labor force participation rate, January (previously 62.5%); U. of Mich sentiment, January final (78.8 expected, 78.8 prior); Factory orders, December (+0.5% expected, 2.6% previous); Durable goods orders, December final (0.0% previous)
Merits: Chevron (CVX), Exxon Mobil (XOM), Charter Communications (CHTR)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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