The S&P 500 (^ GSPC) just hit its best first four trading days under a new president since Ronald Reagan's first week in 1985.
The coming week will bring a deluge of news for investors that will put that rally to the test.
Gains from more than 100 members of the S&P 500 – highlighted by the results of tech heavyweight Meta (META), Microsoft (MSFT), apple (AAPL), and Tesla (TSLA) – are released, with Wednesday serving as the busiest of the week. Starbucks (SEX), Exxon (XOM), and Chevron (CVX) are also set to report.
On Wednesday afternoon, the Federal Reserve will also announce its latest monetary policy decision, with the central bank expected to keep interest rates unchanged and investors focused on what Federal Chairman Jay Powell has to say about the 2025 balance.
Last week, the S&P 500, Nasdaq Composite (^IXIC), and the Dow Jones Industrial Average (^ DJI) all gather during a holiday-shortened four-day trading week. Over the past five days, the S&P 500 and Dow have gained more than 2.8%; the technology index leads gains over that period, rising more than 3.1%.
On Tuesday, markets rallied as the dollar he fell after Trump held back from firing the barrage of across-the-board tariff hikes some expected on his first day in office.
Citi equity strategist Scott Chronert wrote in a note to clients on Friday that implied volatility in rates, the US dollar, and oil all moved lower throughout the week.
“The pricing of some downside policy catalysts were cross-asset phenomena,” Chronert said. “So far, we have seen less macro disruption than initially expected.”
On Wednesday, Trump sparked an AI rally after his announcement a new $500 billion private sector investment called “Stargate” to build artificial intelligence infrastructure in the US, with Oracle (ORCL), creator of OpenAI's ChatGPT, and Japanese conglomerate SoftBank (9984.T) among those committing to the joint venture.
Oracle and SoftBank — along with Microsoft and Nvidia (NVDA) — perch on the news.
In week one, not only did the market's fears of tariffs not materialize, but the still-hot AI trade came back to the fore. A comfortable start to Trump's second administration.
With a busier week of market news expected, investors' focus on Trump's policies will be tested as the typical market-moving Fed announcement highlights the week's economic news.
Data from the CME Group shows markets are pricing in a near 100% chance that the central bank keeps rates steady when it releases its latest policy decision at 2:00 pm ET on Wednesday. Powell's press conference, expected to begin at 2:30 pm ET, is likely the biggest source of volatility in the market.
This past Thursday, Trump said in a virtual appearance at the World Economic Forum in Davos that, with oil prices falling, he would “demand that interest rates come down immediately.” These comments excited discussion about a possible conflict with the Federal Reserve.
Nevertheless, the press conference may be less exciting than usual, according to JPMorgan's chief economist in the United States, Michael Feroli. “Powell's post-meeting press conference has often stolen the show on FOMC day in recent years,” Feroli wrote.
“For next week, however, we expect that he will adopt more of a 'duck and cover' approach. In particular, we anticipate that he will point out that each of the Committee participants is using their own conditioning assumptions on what trade policies are ultimately adopted, and the only thing decided at the meeting was the monetary policy statement agreed next Wednesday.”
President Donald Trump (L) and Federal Reserve Governor Jerome Powell at a nomination ceremony at the White House in Washington DC, in 2017. (Xinhua/Yin Bogu via Getty Images) ·Xinhua News Agency via Getty Images
There are also a number of key reads on the health of the US economy to be published throughout the week.
On Thursday, the first estimate of fourth-quarter GDP is expected to show that the US economy grew at an annualized pace of 2.6% in the final three months of 2024, down from the 3.1% pace seen in the previous quarter.
Friday will feature a new reading of the Fed's preferred inflation gauge, the Personal Consumption Expenditure index, with economists expecting annual “core” PCE – which excludes the volatile categories of food and energy – to have clocked in at 2.8% in December, unchanged from November. Over the previous month, economists project “core” PCE inflation rose 0.2%, faster than the 0.1% seen in November.
RBC Capital Markets head of rates strategy Blake Gwinn wrote in a note to clients on Friday that the data dump at the end of the week – along with Trump's policies – could leave the Fed “playing third fiddle” in markets.
Gwinn argued that either commentary from Trump or the upcoming data “could quickly render obsolete anything Powell says at next week's press conference.”
S&P 500 companies have had a strong start to earnings season. The index is expected to increase earnings by 12.7% compared to the previous year in the fourth quarter, according to FactSet data.
But much of that growth still depends on the performance of the “Magnificent Seven” technology stocks.. And four of those companies – Tesla, Meta, Microsoft, and Apple – will report in the coming week.
This group of seven tech stocks is expected to grow earnings by 21.7% in the fourth quarter compared to the 9.7% earnings growth forecast for the other 493 tech stocks.
But as Venu Krishna, head of US equity strategy at Barclays, pointed out its outlook for 2025given the large earnings growth expected for Big Tech throughout the year, the group is “likely to remain as critical of the EPS growth driver for the S&P 500 as the group was (in 2024).”
Notably, earnings growth for the Great Seven is expected to re-accelerate in the second half of the year after a modest slowdown in the first six months of the year.
Economic data: Chicago Fed National Activity Index, December (previously -0.12); New home sales, month on month, December (+6.6% expected, +5.9% previously)
Economic data: Durable goods orders, December (+0.8% expected, -1.2% previously); FHFA home price index, month-over-month, November (+0.4% previously), S&P CoreLogic Case-Shiller home prices, 20-city index, seasonally adjusted month-over-month, November (+0.3 expected %, previously +0.32%); Consumer Confidence Conference Board, January (expected 105.6, previously 104.7); Richmond Fed manufacturing index, January (previously -10)
Earnings: Boeing (B.A), General Motors (GM), JetBlue (JBLU), Lockheed Martin (LMT), Logitech (WINDOWS), Royal Caribbean Cruises (RCL), SAP (SAP), Starbucks (SEX), Sysco (REASON)
Economic data: MBA Mortgage Applications, week ending January 24 (+0.1% previously); FOMC rate decision (no change expected)
Earnings: Tesla (TSLA), Meta (META), Microsoft (MSFT), ADP (ADP), ASML (ASML), General Dynamics (GD), IBM (IBM), Nasdaq (THEN), Progressive (PGR), Service Now (NOW), T-Mobile (TMUS), VF Corporation (VFC)
