Investors Eye Big Tech Earnings and Fed Rate Decision for Clues on S&P 500 Direction
Investors looking for clues about the direction of the S&P 500 in the coming weeks should pay close attention to three key dates this week.
From Tuesday to Thursday, the five largest technology companies, Microsoft Corp., Alphabet, Meta Platforms, Amazon.com Inc., and Apple Inc., will announce their earnings results. At the same time, the Federal Reserve will release its decision on interest rates following Chairman Jerome Powell’s press conference, where he is expected to discuss future prospects.
The stock market is facing significant risks as investors bet on central banks easing monetary policy, driving the S&P 500 to record levels and boosting market capitalization for tech giants like Microsoft. The performance of these companies will be critical for the market, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
Despite a challenging start to the year, the S&P 500 is on track for a third consecutive month of gains, climbing more than 18% since hitting a recent low in late October. The rally is once again being led by tech giants, with the index rising 24% last year, mostly due to the gains from these companies known as the “Seven Heroes of U.S. stocks.”
Microsoft and Alphabet are expected to benefit from their AI investments, with investors betting on AI boosting profits and sales growth for these companies. Meanwhile, the Federal Reserve is expected to keep interest rates steady for the fourth consecutive meeting, with market watchers eager for clues about the timing of monetary policy easing.
Apple is expected to report its first sales increase in four quarters, adding to the crucial week for tech earnings. However, there are concerns about investors being too heavily concentrated in a few stocks, which could lead to losses if quarterly results underwhelm.
Despite these risks, traders are not rushing to buy options to hedge against falling stock prices. Projected price volatility for several tech giants is at or near its lowest levels in years, suggesting a lack of concern about potential declines in these stocks.
With Microsoft surpassing Apple as the world‘s most valuable company and the stock market experiencing rapid growth, some market experts believe the tech trade is overheated. However, there is optimism about continued growth for these stocks given the favorable economic environment.
As investors continue to closely monitor tech earnings and Federal Reserve decisions, the next few days are poised to provide crucial insights into the future direction of the S&P 500.