Wall Street Faces Crucial Week: Big Tech Earnings, Fed Meeting, and Jobs Report

The stock market rally is in its most fragile state in months as Wall Street braces for its busiest week of the summer. Last week, the S&P 500 (GSPC) and Nasdaq Composite (^IXIC) experienced their worst single-day drops since 2022, struggling to recover losses during a Friday rally. While the Dow Jones Industrial Average (DJI) managed a modest rise of about 0.6%, the S&P 500 was down over 1%, and the Nasdaq fell more than 2.3%. 

This week, the market’s direction will be influenced by several high-stakes events, including a Federal Reserve meeting, the July jobs report, and earnings announcements from major tech companies such as Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Meta (META). Additionally, updates on job openings, activity in the services and manufacturing sectors, and consumer confidence are also on the calendar.

A total of 171 members of the S&P 500 are expected to report quarterly results, with notable names like AMD (AMD), Arm (ARM), Boeing (BA), McDonald’s (MCD), and Starbucks (SBUX) highlighting the schedule.

The Federal Reserve will announce its latest monetary policy decision on Wednesday. Markets largely expect the central bank to hold rates steady at its July meeting. However, recent economic updates have investors speculating on when the Fed’s first rate cut might occur. In June, the core Personal Consumption Expenditures (PCE) index, a key measure of inflation, rose 2.6% over the prior year, marking its lowest annual increase in more than three years. Separate data showed a significant decrease in the Consumer Price Index (CPI) for the same month.

The labor market has also shown signs of cooling, with the ratio of job openings to unemployed workers returning to pre-pandemic levels and the unemployment rate reaching its highest level since November 2021. These factors have prompted markets to anticipate a possible rate cut in September. Investors will be closely listening to Federal Reserve Chair Jerome Powell’s press conference on Wednesday for any confirmation.

Deutsche Bank chief US economist Matthew Luzzetti noted, “The overall tone from the meeting, including from Chair Powell’s press conference, should signal that a rate cut in September is a reasonable baseline without pre-committing to this action.”

On Friday, the July jobs report will provide a fresh look at monthly job additions, as economists debate whether recent cooling in the labor market represents normalization or more significant deterioration. The report is expected to show that 175,000 nonfarm payroll jobs were added to the US economy, with unemployment holding steady at 4.1%, according to Bloomberg data. In June, the US economy added 206,000 jobs, and the unemployment rate rose to 4.1%.

Wells Fargo’s economics team, led by Jay Bryson, commented, “The 180K increase to payrolls we expect in July would still be a respectable gain, but would underscore that, directionally, the jobs market is deteriorating. By a range of measures, including the unemployment rate, quit rate, level of temporary help workers, and small business hiring plans, the labor market is not only softer than a year or two ago but weaker compared to its pre-pandemic state.”

The stock market’s recent slump has included a significant sell-off in tech stocks. Since July 10, Roundhill’s Magnificent Seven ETF (MAGS) — which tracks Nvidia (NVDA), Apple (AAPL), Alphabet (GOOGL, GOOG), Amazon (AMZN), Meta (META), Microsoft (MSFT), and Tesla (TSLA) — has dropped about 12%.

Truist co-chief investment officer Keith Lerner explained that the pullback made sense given the substantial runup in Big Tech stocks over the past year and the overstretched positioning in many large tech stocks. This trend, combined with investors rotating into less-loved areas of the market rally that could benefit from potential Fed rate cuts, has characterized market action over the past two weeks.

Earnings reports from Amazon, Meta, Microsoft, and Apple could influence this trend. However, as seen with the sell-off following Alphabet and Tesla earnings, it has been a challenging season to impress investors with earnings.

Lerner noted, “When we look at the earnings that we’ve seen over the last week, I don’t think the earnings are bad. I don’t think the businesses, the fundamental business trends, are bad, but I just think that they were not good enough relative to these really high [expectations].”

Research from Evercore ISI’s Julian Emanuel supports this view, indicating that stocks missing Wall Street estimates for earnings, revenue, or both are experiencing significantly worse price reactions than typically seen over the past five years. Emanuel wrote in a note to clients, “Earnings remain a catalyst for volatility, not higher S&P 500 prices.”

Weekly Economic and Earnings Calendar

 Monday

Economic Data: Dallas Fed manufacturing activity, July (-14.2 expected, -15.1 prior)

Earnings: McDonald’s (MCD), Philips (PHG), Tilray (TLRY)

 Tuesday

Economic Data: S&P CoreLogic 20-city year-over-year NSA, May (7.2% prior); Conference Board consumer confidence, July (99.7 expected, 100.4 prior); JOLTS job openings, June (8.14 million prior); Dallas Fed services activity, (-4.1 prior)

Earnings: Microsoft (MSFT), Advanced Micro Devices (AMD), BP (BP), Caesars Entertainment (CZR), Electronic Arts (EA), First Solar (FSLR), JetBlue (JBLU), Marathon Petroleum Corporation (MPC), Merck (MRK), Pinterest (PINS), Pfizer (PFE), Procter & Gamble (PG), Starbucks (SBUX), SoFi (SOFI)

 Wednesday

Economic Data: MBA Mortgage Applications, week ended July 26 (-2.2% prior); ADP private payrolls, July (+168,000 expected, +150,000 prior); Minnesota Chicago PMI, July (44.0 expected, 47.4 prior); Employment cost index, second quarter (1.0% expected, 1.2% prior); Federal Reserve monetary policy decision (no interest rate change expected)

Earnings: Meta (META), Altria (MO), Arm (ARM), Boeing (BA), Carvana (CVNA), Generac (GNRC), Humana (HUM), The Kraft Heinz Company (KHC), Mastercard (MA), Norwegian Cruise Lines (NCLH), Paycom (PAYC), Qualcomm (QCOM)

 Thursday

Economic Data: Challenger jobs cuts, year-over-year, July, (+19.8% prior); Unit labor costs, second quarter (+4% prior); Nonfarm productivity, fourth quarter (+1.6% expected, +5.2% prior); Initial jobless claims, week ending July 27 (235,000 prior); S&P Global US manufacturing PMI, July final (49.5 prior); Construction spending, month-over-month, July (+0.2% expected, -0.1% prior); ISM manufacturing, July (49 expected, 48.5 prior); ISM prices paid, July (52.1 prior)

Earnings: Apple (AAPL), Amazon (AMZN), Block (SQ), Booking Holdings (BKNG), Canada Goose (GOOS), Coinbase (COIN), ConocoPhillips (COP), Crocs (CROX), DraftKings (DKNG), Marathon Digital Holdings (MARA), Mobileye (MBLY), Moderna (MRNA), Roku (ROKU) SiriusXM (SIRI), Wayfair (W)

 Friday

Economic Data: Nonfarm payrolls, July (+175,000 expected, +206,000 prior); Unemployment rate, January (4.1% expected, 4.1% previously); Average hourly earnings, month-over-month, July (+0.3% expected, +0.3% prior); Average hourly earnings, year-over-year, July (+3.7% expected, +3.9% prior); Average weekly hours worked, July (34.4 expected, 34.3 prior); Labor force participation rate, July (62.6% previously); Factory orders, June (+0.5% expected, -0.5% prior); Durable goods orders, June final (-6.6% prior)

In conclusion, this week is pivotal for Wall Street, with significant events likely to impact market directions. Investors will be watching closely as Big Tech companies report earnings, the Federal Reserve makes its policy decision, and the latest jobs report is released.