Week ahead: Wall Street's biggest summer test is here with Big Tech, Fed on deck
Wall Street is heading for a pivotal week as Big Tech earnings, the Federal Reserve’s rate decision and key inflation data test a market hovering near record highs.
The busiest stretch begins on Wednesday, when Microsoft and Meta Platforms report earnings before the focus quickly shifts to the Fed’s interest rate decision later in the day. Apple and Amazon then take center stage on Thursday, giving investors another read on whether the AI boom is still worth its hefty price tag.
After Tesla and Alphabet were punished last week for rising AI-related capital spending, investors are expected to scrutinize spending plans just as closely at Microsoft, Meta and Amazon. While demand for AI infrastructure remains strong, markets are becoming less forgiving of companies pouring billions into expansion.
Outside Big Tech, earnings season remains in full swing with reports due from Visa, Boeing, Coca-Cola, Qualcomm, Starbucks, Shell, Coinbase, Chevron, ExxonMobil and AbbVie.
The Fed, however, may be the week’s biggest catalyst.
Most economists expect policymakers to leave interest rates unchanged in a range of 3.5% to 3.75%, but investors will be paying close attention to Fed Chair Kevin Warsh’s comments on inflation, economic growth and whether higher oil prices have altered the central bank’s outlook.
Markets have become increasingly uncertain after recent geopolitical tensions pushed oil prices sharply higher, although sentiment improved at the start of the week after reports that the US and Iran agreed to pause hostilities.
Kathleen Brooks, research director at XTB, said the sharp drop in oil prices has boosted investor confidence. “There has been a major shift in financial markets this morning,” Brooks said, noting Brent crude has fallen back to around $86 a barrel after briefly approaching $100 last week.
That retreat in oil prices has lifted equity futures and eased pressure on bond yields, although Brooks cautioned that geopolitical risks have not disappeared.
“The events of the last two weeks have reminded us that geopolitical risks are never far away,” she said. “There are still other hurdles for equities to pass in the coming days including earnings reports and a Fed rate decision.”
Thursday brings another key test with the release of the July core PCE price index, the Fed’s preferred inflation measure. Economists expect annual core PCE inflation to come in at 3.3%, while durable goods orders, home price data, second-quarter GDP figures and Friday’s employment cost index will provide further clues on the health of the US economy.