The upcoming week will be pivotal for the stock market with major earnings reports, a critical FOMC meeting, and significant economic data releases expected to drive volatility and shape market trends.
Last week's market action was just a prelude, and investors should prepare for a potentially more dramatic week ahead, according to Jay Woods, chief global strategist at Freedom Capital Markets (NASDAQ:FRHC).
With the busiest week of earnings for the quarter, market volatility is expected to continue. Four major companies are set to report earnings, and the stakes are high.
"Reaction to earnings in many of the large caps has been inconsistent at best," Woods wrote in his weekly newsletter. "The one steady factor is if you miss, you get punished. When it comes to tech, if you beat then you won’t go down as much."
Key stocks to watch this week include Meta Platforms, Lam Research, and Apple, each facing critical earnings tests. The market's response to their results will provide crucial insights into broader trends. The tech giants, driven by strong AI demand, will be under the microscope for their capital expenditure plans.
Capex will be in focus as most of the Big Tech firms continue to spend due to strong AI demand, according to Woods. “Will a bigger spend continue and when will they see the benefits of their investments?” he wrote. “Will this be perceived as money well spent or will the stocks get punished?”
Adding to the excitement, the FOMC meeting on Wednesday will be closely watched. While a rate cut this meeting is unlikely, the tone of Fed Chair Jerome Powell's language will be key.
The US unemployment report for July, set to be released on Friday, is also pivotal. The expected rate is to remain at 4.1%.
“Any reading that sees an acceleration would help with a rate cutting narrative, but also add some angst in the soft landing camp and the ‘economy is OK’ narrative,” Woods noted. “You’ll likely start to hear recession talk with a higher number.”
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