Next week is shaping up to be the most important one of 2024 thus far for Wall Street. Investors are headed into the thick of earnings season, with results on deck from the bulk of the so-called Magnificent Seven names. These companies have high bars to clear as they try to justify their valuations after their recent rally. Alphabet , Apple , Amazon , Meta Platforms and Microsoft are all set to report. On top of that, the Federal Reserve’s latest monetary policy decision and the January jobs report will be in focus. Mega-cap tech results will be especially important for investors who have been seeking signs of a broadening rally in 2024, only to be disappointed thus far. While tech behemoths such as Nvidia have climbed 23% this year, the small-cap Russell 2000 is lower by more than 2%. “Those earnings are particularly important because we’ve continued to see, despite the fact that we were expecting a rotation, we’re still seeing strong performance out of the technology and communication services stocks to start the year,” said Shannon Saccocia, chief investment officer at NB Private Wealth. As it is, some worry that a failure of the broader market to catch up to the mega-cap high fliers could suggest the recent rally won’t be sustainable for much longer. “At some point we continue to believe that something’s gotta give,” BTIG’s Jonathan Krinsky wrote Thursday. “The longer this divergence goes the more violent its resolution is likely to be. When there are fewer names supporting the indices, a downside unwind can be quite vicious.” Stocks wobbled Friday, but the three major averages — S & P 500, Dow Jones Industrial Average and Nasdaq Composite — registered their 12th winning week in 13. The S & P 500 and Nasdaq gained about 1% for the week, each, while the Dow rose 0.7%. No room to disappoint The mega-cap tech companies reporting next week have a lot to live up to as investors worry they may have run up too high and too fast on artificial intelligence dreams. Tesla on Wednesday posted weaker-than-expected results, sending the stock down more than 14% for the week. After the results were released, JPMorgan slashed Tesla’s price target to $130 — implying about a 30% drop from Thursday’s close — saying the company’s price cuts on its electric vehicles is eating into profits. “There’s not a whole lot of room for them to disappoint. We saw that with Tesla, and that’ll be the case with all of the Mag Seven names in general,” said Art Hogan, chief market strategist at B. Riley Securities. “When you’ve had the kind of moves that these names have had, you tend to have a larger propensity to overreact to the downside on something that’s in line or modestly negative, versus having a big reaction to the upside if you actually do beat,” Hogan added. Disappointing results would be a major drag on equities, as mega-cap tech accounts for so much of the S & P 500’s market cap, spelling an opportunity into other parts of the market. “I think it’s a real opportunity, at least next week, for a little bit of a resurgence maybe in those value stocks versus those really expensive growth stocks, depending on what kind of outlook they give for 2024,” said John Bailer, portfolio manager at Newton Investment Management. “So, I think that that could be a big driver of the market activity going forward here.” Federal Reserve meeting Investors aren’t anticipating much out of the Fed meeting next week. According to the CME FedWatch tool , markets are pricing in near certainty the central bank will hold rates steady at the January meeting. There won’t be a new summary of economic projections from the meeting to give insight into the number and timing of interest rate cuts this year. Still, Fed Chair Jerome Powell is expected to maintain a hawkish bias and push back against hopes of a rate cut coming as soon as March, according to Tony Welch, chief investment officer at Signature FD. While markets are currently in a 46% likelihood of a quarter-percentage-point cut in March, Welch expects the earliest the Fed would cut would be in June. “By the time you get to the June meeting, if trends continue the way they are, you’re going to likely have a softer inflation number, you’re going to have likely even more softening in the labor market, and that’s probably where they have the cover to cut for the first time,” Welch said. As it is, investors have been getting more encouraging news on the inflation front. This past week, the personal consumption expenditures report , known as the Fed’s favorite inflation measure, and the PCE in Thursday’s GDP report, continued to confirm the downward trend in inflation. January jobs More clues into whether the labor market is cooling will also come next week in the form of the January jobs number, due out Friday. Market participants say recent reports show the trends have been going in the right direction, and Friday’s report is expected to confirm the softening in the jobs market. Economists polled by FactSet anticipate the U.S. will have added 170,000 in nonfarm payrolls, a drop from 216,000 in the month prior. The unemployment rate is expected to have ticked up to 3.8%, from 3.7% previously. Other significant earnings in the week ahead include Boeing , a major Dow component. Investors will carefully scrutinize how the firm’s management plans to deal with the fallout from the Alaska Airlines emergency earlier this month that grounded its 737 Max 9 planes. The January consumer confidence report is also on deck next week. Week ahead calendar All times ET. Monday 10:30 a.m. Dallas Fed Index Earnings: Whirlpool Tuesday 9 a.m. FHFA Home Price Index (November) 9 a.m. S & P/Case-Shiller comp.20 HPI (November) 10 a.m. Consumer Confidence (January) 10 a.m. JOLTS Job Openings (December) Earnings: Marathon Petroleum , United Parcel Service , General Motors , Pfizer , Advanced Micro Devices , Alphabet , Starbucks , Microsoft Wednesday 8:15 a.m. ADP Employment Survey (January) 8:30 a.m. ECI Civilian Workers (Q4) 9:45 a.m. Chicago PMI (January) 2 p.m. FOMC Meeting 2 p.m. Fed Funds Target Upper Bound Earnings: Boeing , Mastercard , Qualcomm Thursday 8:30 a.m. Continuing Jobless Claims (1/20) 8:30 a.m. Initial Claims (1/27) 8:30 a.m. Unit Labor Costs preliminary (Q4) 8:30 a.m. Productivity preliminary (Q4) 9:45 a.m. Markit PMI Manufacturing final (January) 10 a.m. Construction Spending (December) 10 a.m. ISM Manufacturing (January) Earnings: Meta Platforms , Amazon , Apple , Royal Caribbean , Clorox Friday 8:30 a.m. Jobs report (January) 10 a.m. Durable Orders (December) 10 a.m. Factory Orders (December) 10 a.m Michigan Sentiment final (January) Earnings: Chevron , Exxon Mobil
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