The stock market’s recent record high faces challenges in the coming week as corporate earnings reports, particularly from big tech companies, and a fresh reading of the Fed’s preferred inflation gauge take center stage. Notable earnings releases include Netflix (NFLX) on Tuesday and Tesla (TSLA) on Wednesday, along with reports from Johnson and Johnson (JNJ), United Airlines (UAL), Verizon (VZ), and AT&T (ATT). Additionally, economic data releases, such as the fourth-quarter economic growth reading and the release of the Personal Consumer Expenditures (PCE) Index, will provide insights into the market’s trajectory.
Key Points:
- Tech Earnings in Focus: With most financial institutions having reported, the spotlight shifts to tech results. Netflix’s earnings on Tuesday and Tesla’s on Wednesday will be closely watched. The performance of technology earnings may indicate the market’s short-term direction.
- Economic Data Releases: Thursday will see the first reading of economic growth for Q4, offering a crucial glimpse into the state of the economy. Meanwhile, Friday’s release of the PCE Index, the Fed’s preferred inflation gauge, will provide valuable information on inflation trends.
- Market Records: Stocks closed at or near their highest levels on record, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all in positive territory for January. Consumer sentiment data indicates positive perceptions about the economy.
- Economic Resilience: Despite concerns, recent data on retail sales and unemployment benefit claims suggest a resilient economy. Analysts project a 2% annualized growth in the US economy for Q4.
- Fed Rate Cut Speculation: The debate on Wall Street centers around when the Federal Reserve will cut interest rates. Investors are currently placing a 49% chance of a March rate cut, with many economists linking it to the trajectory of inflation, expected to be updated with the release of the PCE index for December on Friday.
- Earnings Trends: While fourth-quarter earnings have had a weak start, much of it is attributed to financials. As the focus shifts to Technology and Communication Services in the coming weeks, expectations are for earnings growth compared to the same quarter a year ago.
- Upcoming Economic Events: Notable economic events throughout the week include the release of GDP and Personal Consumption Expenditures data on Thursday and a comprehensive update on inflation with the PCE index for December on Friday.
- Market Sentiment: With the Fed in its blackout period, earnings reports are expected to be a key driver of stock market sentiment in the week ahead.
As investors navigate through a busy week of earnings reports and economic data, the market’s performance will likely be influenced by the interplay of corporate results and inflation indicators.
