Earnings to test market rally: What to know this week

Josh Schafer · Reporter
Updated 4 min read

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Stocks are back near record highs, with the S&P 500 finishing Friday at 4,959, its highest close ever. All three major indexes logged gains for the week, surviving a tumultuous week of trading.

Stocks initially slid following lackluster tech results from Microsoft (MSFT) and Alphabet (GOOG, GOOGL), and sold off further on Wednesday when Fed Chair Jerome Powell said an interest rate cut in March is not the "base case."

But blowout earnings from Meta (META) and Amazon (AMZN), combined with a stronger-than-expected January jobs report, sent stocks into rally mode.

morning brief image

For the week, the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) rose more than 1% while the Nasdaq Composite (^IXIC) gained just under 1%.

A slew of corporate earnings, including reports from Eli Lilly (LLY), Disney (DIS), Spotify (SPOT), McDonald's (MCD), Chipotle (CMG), and Pepsi (PEP), will greet investors in the week ahead amid a light economic schedule.

The rate cut debate rolls on

Federal Reserve Chair Jerome Powell poured even more cold water on investor hopes for a March interest rate cut by saying the central bank can be "prudent" in deciding when to cut its benchmark interest rate in an interview with "60 Minutes" aired Sunday evening.

That underlined Powell's point made in comments during his press conference following the January Fed meeting when he said the central bank needs "greater confidence" in inflation's path lower before cutting rates.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

Economists believe the January jobs report, which showed the US economy added 353,000 jobs in the month, bolsters the Fed's case it can wait to cut interest rates without pushing the economy into recession. But the report also brought forth concerns about inflation reaccelerating, as wages increased 4.6% in the month, the highest pace of growth since July 2023.

"After the FOMC meeting on Wednesday, we maintained confidence in our expectation of a March rate cut," Jefferies US economist Thomas Simons wrote in a note to clients on Friday. "After today's data, however, it is hard to see how that is going to happen. Barring a significant turnaround in the February data, or very weak inflation data between now and mid-March, it is much more likely that the FOMC will hold policy rates steady in March."

Investors are now placing a roughly 15% chance on an interest rate cut at the March meeting, per the CME FedWatch Tool. On Thursday, there had been a nearly 40% chance and a month ago nearly an 80% chance.

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