The Market's Mixed Signals After Trump's Return
The S&P 500 (^GSPC) has experienced a strong start to President Trump's second term, posting its best first four trading days under a new president since Ronald Reagan's first week in office in 1985. However, the upcoming week poses a series of challenges that will test the resilience of the rally.
Earnings Season Intensifies
Over 100 S&P 500 companies are scheduled to report earnings, with a particular focus on tech heavyweights such as Meta (META), Microsoft (MSFT), Apple (AAPL), and Tesla (TSLA). Their performance will significantly impact the overall earnings growth for the index, which is currently projected at 12.7% for the fourth quarter.
Federal Reserve Policy Announcement
On Wednesday afternoon, the Federal Reserve will announce its latest monetary policy decision. While interest rates are expected to remain unchanged, investors will be paying close attention to Fed Chair Jay Powell's comments on the outlook for 2025. Last week, Trump suggested he might demand lower interest rates, potentially setting up a potential clash with the central bank.
Trump's Economic Policies
The market's focus on Trump's policies will be tested as the week progresses. On Tuesday, the Chicago Fed National Activity Index and new home sales data will provide insights into the health of the economy. On Wednesday, the Federal Reserve's rate decision and Powell's press conference will offer clues about the path of monetary policy.
Earnings Outlook for Big Tech
The "Magnificent Seven" tech stocks, including Meta, Microsoft, and Apple, are expected to drive a significant portion of the index's earnings growth, with a projected increase of 21.7% in the fourth quarter. However, strategists anticipate that the earnings growth gap between these tech giants and the rest of the market will narrow throughout the year.
Weekly Economic Calendar
* Monday: Chicago Fed National Activity Index, new home sales
* Tuesday: Durable goods orders, FHFA house price index, S&P CoreLogic Case-Shiller home prices, Consumer Confidence, Richmond Fed manufacturing index
* Wednesday: MBA Mortgage Applications, FOMC rate decision
* Thursday: Fourth quarter GDP estimate, Personal consumption, Core PCE, initial jobless claims
* Friday: Core PCE index, Employment cost index