Wall Street’s week ahead: U.S. stocks face tests from Fed decision, tech-led earnings deluge
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- Alphabet and Tesla posted steep weekly stock declines after quarterly reports, with Alphabet's outlook dented by an increase in its AI spending plans, setting a negative tone ahead of results from Microsoft, Amazon, and Meta Platforms.
- The Federal Reserve holds its policy meeting Wednesday with Fed funds futures pricing in a 38% chance of a quarter-point rate hike; it will be the second meeting under new chair Kevin Warsh, who has shunned forward guidance.
- Brent crude hit $100 a barrel on Thursday amid escalating Middle East tensions, fanning fears the Fed will need to raise rates more aggressively against inflation that has consistently run above its 2% target.
- The 10-year Treasury yield topped 4.7% on Thursday, its highest level since early 2025, with Fed funds futures factoring in two quarter-point hikes by the January 2027 meeting.
- About one-third of S&P 500 companies report next week—the busiest week of Q2 earnings season—with index earnings on track for a 26.5% year-over-year jump, per LSEG IBES data as of Wednesday.
- Investors now view massive AI capex from hyperscalers as a risk rather than opportunity, meaning Microsoft, Amazon, and Meta could be punished even if they beat expectations, per Man Group's Kristina Hooper.
Why it matters: Investors are 'walking on eggshells' into a week pairing a Fed decision with results from the three remaining AI hyperscalers, after Alphabet was punished for boosting capex. With Brent at $100, the 10-year above 4.7%, and two hikes priced by January 2027, even earnings beats may not satisfy a market now primed to see AI spending as a risk.
