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Transit strike: What you need to know for your commute this week | Urbanized – Everyday Hive

Lucas Jackson/Reuters

  • This week will be a big one for the stock market as investors face a wave of data.

  • The two largest companies in the world, Microsoft and Apple, will report earnings results.

  • Investors will also have to navigate an interest rate decision by the Federal Reserve and the January jobs report.


It’s about to be a big week for the stock market as investors face a wave of economic data and decide whether the ongoing rally to record highs has staying power or not.

The S&P 500 is coming off two weeks that saw the benchmark index hit a record high, buoyed by earnings optimism and data showing the U.S. economy grew at a healthy clip even as inflation continued to show up. sign of cooling.

This week, however, could make or break the rally of the past two weeks, with three major events awaiting investors.

Mega-cap income in chaos

The chaos began on Tuesday with earnings results from mega-cap tech companies Microsoft and Alphabet. Investors will pay close attention to the commentary related to artificial intelligence, where the two companies are leading, and how it will affect their business in 2024 and beyond.

Revenue guidance will be key as analysts’ profit expectations are at the high end this year after single-digit revenue growth in 2023.

“Markets are walking a fine line between the expectation of lower interest rates and higher corporate earnings,” said DataTrek co-founder Nicholas Colas in a recent note on clients. “US equity estimates offer little room for error.”

According to data from FactSet, Wall Street expects 2024 S&P 500 earnings growth of 12.2%, which has accelerated in recent months and is above the 10-year average of 8.4%. Any disappointment in earnings guidance could send the stock market tumbling as analysts adjust their earnings estimates lower.

Enter the Fed

Fast forward to 2pm this Wednesday and investors will be focusing on the Federal Reserve’s latest interest rate decision and a follow-up speech from Fed Chairman Jerome Powell at 2:30pm.

While the Fed is expected to keep interest rates unchanged, Powell is likely to provide insights into when the central bank will consider its first interest rate cut since 2019, in addition to how the rate cuts it sees in 2024.

Investors are currently expecting six 25 basis point interest rate cuts from the Fed in 2024, but the Fed is only guiding for three rate cuts.

That’s a big disconnect, and it has market-moving implications as the gap between investors and the Fed narrows.

“This level of economic growth along with a tight labor market and above target inflation is likely to make the journey across the monetary policy bridge longer and riskier, with market players now pricing in the first Fed cut in May compared to March,” José Torres, Senior Economist at Interactive Brokers said in a note seen by Business Insider.

After the Fed, earnings season has another big day on Thursday, with heavyweights Apple and Amazon set to release their fourth-quarter results.

By the end of next week, more than $10 trillion in S&P 500 market value will report earnings results, giving investors a good sense of the current state of corporate earnings growth.

Reporting on deck jobs

The week will end with an economic data dump on Friday with the release of the January jobs report and an update on the unemployment rate.

Current estimates suggest the economy will add 216,000 jobs in January, with the unemployment rate unchanged at 3.7%.

A strong jobs report, coupled with a strong fourth quarter GDP report, could delay the Fed’s interest rate cut schedule, while any signs of market weakness of labor could accelerate the Fed’s decision to cut rates as they seek to avoid a recession.

The one-two punch of corporate earnings from America’s biggest companies and economic data could ultimately set the direction of the stock market in the coming weeks as investors grapple with whether or not the record rally.

“Market direction is likely to be determined by investors focusing on the potential for a strong economy to support earnings growth, or fears that prolonged monetary tightening will challenge earnings, valuations, and economic prospects,” Torres said.

Read the original article on Business Insider

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