"Seven Giants" earnings reports face off against the Federal Reserve's interest rate meeting, investors may become the ultimate winners
Against the backdrop of the stock market as a boxing ring, the showdown between the "Seven Giants" and the Federal Reserve's earnings reports has drawn investors' attention. The S&P 500 index rose by 1.8%, the Dow Jones increased by 2.2%, and the Nasdaq climbed by 1.7%. Tech giants like Apple, Microsoft, Meta, and Tesla, which are about to announce their earnings reports, are expected to drive the market. Although Meta's profits are expected to grow by more than 25%, the market has already priced in these expectations. The Federal Reserve is expected not to cut interest rates at the meeting on January 29, and Wall Street believes there may be one to two rate cuts this year
According to Zhitong Finance APP, if the stock market is likened to a boxing ring, one side features the "Magnificent Seven," while the other side is the Federal Reserve, and investors may be the ultimate winners.
In the past week, as earnings reports gradually disclosed and President Trump's policies temporarily did not bring significant shocks, investors have benefited greatly. The S&P 500 index rose 1.8% this week, reaching a record high on Thursday, while the Dow Jones Industrial Average increased by 2.2%, and the Nasdaq Composite Index rose by 1.7%.
Next, the market will welcome a "main event." Apple (AAPL.US), Microsoft (MSFT.US), Meta (META.US), and Tesla (TSLA.US) will announce their earnings reports in the week of January 27. Investors hope that these tech giants' earnings reports can push the market to new heights, similar to Netflix. Although Netflix is not one of the "Magnificent Seven," its outstanding performance in the fourth quarter triggered a surge in its stock price.
Nanette Abuhoff Jacobson, global investment strategist at Hartford Funds, stated that the performance of these tech giants is expected to be "exceptional," for example: Meta's profits are expected to grow by more than 25%. However, the market may have already priced in this growth expectation. Phil Blancato, chief market strategist at Osaic, reminds investors not to chase tech stocks. He said, "If you already own tech stocks, enjoy the gains. But don't buy in now." His main concern is valuation issues.
Meanwhile, the Federal Reserve may be ready to "strike hard." The market generally expects that the Federal Reserve will not cut interest rates at the meeting on January 29, and the likelihood of a rate cut at the March meeting is also low. However, many on Wall Street believe that the Federal Reserve may still cut rates one to two times this year.
Tracey Manzi, senior investment strategist at Raymond James, stated, "The Federal Reserve may believe that the current policy is in a good position. It has room to be patient and observe changes in economic data." She believes that the yield on the 10-year Treasury bond may not fluctuate significantly, expecting it to remain in the range of 4.4% to 4.8%.
But don't forget "Trumponomics." Tariff policies may lead to a rebound in inflation, especially the tightening of immigration policies may reduce labor supply and push up wages. These factors could prompt Federal Reserve Chairman Powell to adopt a more hawkish stance, putting pressure on a market that has just emerged from the "hawkish" aftershocks of last December.
Lawrence Werther, chief economist at Daiwa Capital Markets America, stated that although he does not believe the Federal Reserve will make significant policy adjustments, he expects the Federal Reserve to cut rates in March and June, then observe the impact of Trump's fiscal policies on consumer prices. He said, "The Federal Reserve may preemptively cut rates and prepare for potential inflationary pressures."
If inflation does not return as strongly as expected, the market may focus more on strong corporate earnings reports, and long-term bond yields may also decline. This would satisfy investors while also aligning with Trump's demand for low interest rates