Wall Street’s week ahead: U.S. stocks face tests from Fed decision, tech-led earnings deluge
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- Alphabet and Tesla shares slid sharply Thursday after their quarterly reports, with Alphabet's increased AI spending plans dragging major indexes into weekly declines ahead of results from Microsoft, Amazon, and Meta.
- The Federal Reserve is expected to hold rates steady at its Wednesday meeting, but Fed fund futures price a 36% chance of a quarter-point rate hike, with two quarter-point hikes priced in by the January 2027 meeting.
- Brent crude hit $100 a barrel on Thursday amid escalating Middle East tensions, fueling fears that policymakers will need to act more aggressively to bring inflation down from above the Fed's 2% target.
- The 10-year Treasury yield topped 4.7% on Thursday, reaching its highest level since early 2025, raising competition for equities as borrowing costs climb.
- Microsoft, Amazon, Meta, Apple, Visa, Chevron, and Coca-Cola are among companies reporting next week, making it the busiest week of the Q2 reporting season with about one-third of S&P 500 constituents posting results.
- S&P 500 Q2 earnings are on track for a 26.5% year-over-year increase, but Man Group's Kristina Hooper says investors are shifting from viewing AI spending as opportunity to viewing it as risk.
Why it matters: The Fed's signal on rates — combined with how Microsoft, Amazon, and Meta address their AI capex — will determine whether the S&P 500's 8% 2026 gain extends or reverses. With the 10-year yield at 4.7% and Brent at $100, investors have little room for disappointment on either the inflation path or AI returns.
