Megacaps lead major earnings week as traders seek clarity on the bull market

The Magnificent Seven companies reporting in the week ahead could unlock the next leg of the rally, as investors bet that earnings growth fueled by artificial intelligence could power a market some worry has gone to excess. The Federal Reserve will also hold its January meeting, with key inflation data coming Friday. Four out of seven mega-cap companies are set to report in the week ahead. Meta Platforms , Microsoft and Tesla each report results on Wednesday. Apple is due out with its report Thursday. Those results could be huge for a stock market that reached a new all-time record this week. Investors are betting that President Donald Trump’s pro-growth policies, together with a strong economy and softening inflation, could power earnings growth for companies and justify their lofty valuations after the gains of the prior two years. .SPX 3M mountain S & P 500 A positive surprise from the Magnificent Seven companies, which together account for something like 40% of the S & P 500, could reignite the AI frenzy, adding to animal spirits. If those same names disappoint, however, that could hurt a market that relies so much on the megacap tech companies for its move higher. “It’s really gonna come down to earnings,” said Ken Mahoney, CEO of Mahoney Asset Management. “I think the story is still here” in tech, Mahoney continued. “Even though you hear naysayers, saying growth rates are gonna slow down, or that was last year’s theme, … I still think investors are attracted to earnings growth. Yes, they’re paying more valuation, but still attracted to these great growth stories.” Tech companies got a further boost this week after Trump announced “Stargate,” a partnership between Oracle , SoftBank and OpenAI to spend $500 billion dollars building out AI infrastructure. Other headlines are bullish for the sector, including Microsoft saying earlier this month that it plans to spend $80 billion in fiscal 2025 on the construction of AI data centers. AAPL YTD mountain Apple In particular, Apple’s results come at an interesting time for the stock, which has sat out the recent tech rally. The iPhone maker is down more than 14% off its recent highs. Shares are down 11% just this month, as investors worry its upcoming earnings could disappoint. It’s gotten not one, but two downgrades this week, and has ceded the title as the world’s most valuable public company once again to Nvidia. Still, with a more than $3.3 trillion market cap, how Apple does next week could either lift or hurt the market. Mahoney said he’s been buying the stock earlier this week, calling any dip a buying opportunity. Specifically, he said he’s confident in CEO Tim Cook’s transitioning the company into services, and away from hardware. “The bar is low, which is nice,” Mahoney said, adding, “Coming into earnings when the bar is low is a better setup for investors than when a company is going parabolic into earnings.” Elsewhere, the December personal consumption expenditures price index will be coming out Friday, which investors expect could be the final bit of data showing higher inflation. The December data could show inflation rising 2.6% on a year over year basis, per FactSet. That’s up from 2.4% previously. “I think it’s going to be a cascading series of data that will either help investors confirm that the market is likely to continue to rise this year, or whether there could be additional challenges ahead,” said Sam Stovall, chief investment strategist at CFRA Research. Stocks are headed for their second winning week in a row. Powell v. Trump President Trump’s comments Thursday at the World Economic Forum, at which he said he will ” demand that interest rates drop immediately ,” could add friction to a central bank meeting next week that investors thought they had mostly figured out. There’s no rate cut forthcoming, according to fed funds futures pricing , and no dot-plot to give traders a clue into what will happen for the remainder of 2025. The Federal Reserve is independent of the executive branch, and investors do not expect policymakers will oblige the president’s demand for a rate cut. Still, Trump’s comments could act as a wedge between him and Fed Chair Jerome Powell, with whom he has had a contentious relationship. While Trump selected Powell for the job back in 2017 , he has since criticized the Fed chief, and has suggested he get a greater say in monetary policy. In November, asked by reporters at the post-meeting press conference whether he would step down if Trump asked him to, Powell said: “No.” When pressed further, he added that that is, “not permitted under the law.” By any chance, if the Fed were to cut at the January meeting, the dovish decision could alarm investors who worry that an easier monetary policy would be too stimulative given the president’s pro-growth policies, with inflation expected to turn lower, and the economy already robust. “The Federal Reserve is independent of the executive branch,” Mahoney of Mahoney Asset Management wrote. “And actually, if the Federal Reserve listened to him and cut Fed fund rates, it’s very possible that the 10-year yield would go higher, and that’s where most of the mortgages and debt is used from.” “I’m not sure if one of his strategies is to get rid of Jerome Powell,” Mahoney added. “But if it is, that would trigger some instability as he’s done a decent job navigating these volatile times.” CFRA’s Stovall put it even more succinctly, writing: “As The Rolling Stones once sang ‘You can’t always get what you want.'” ‘As goes January’ One more reason to be bullish on markets this year is the January Barometer. According to Yale Hirsch, founder of the Stock Trader’s Almanac who first coined the phrase, the historical pattern suggests that “as goes January, so goes the year.” In fact, the major averages are set to close out the month with surprisingly strong gains, with the Dow Jones Industrial Average up more than 4%, and the S & P 500 and Nasdaq up more than 3%. Since World War II, a positive January in the first year of a presidential cycle has typically led to an 18.3% gain in the S & P 500, which was up 91% of the time, according to CFRA’s Sam Stovall. Still, with strategists on average expecting the S & P 500 to end the year anywhere from 8% to 10% higher, following the greater than 20% advance of the prior two years, some worry a strong January performance could be a near-term negative for markets. Chen Zhao, chief global strategist at Alpine Macro, said that he is positive stocks can end the year with a solid advance, given the strong fundamental backdrop, but he said the current optimism in markets suggests a pullback is on its way. “I don’t know the catalyst, but I do know the market is trading on one side right now, on the bullish side,” Zhao said. “That usually means you’ve got some kind of correction coming soon.” Week ahead calendar All times ET. Monday, Jan. 27 8 a.m. Building Permits final (December) 8:30 a.m. Chicago Fed National Activity Index (December) 10 a.m. New Home Sales (December) 10:30 a.m. Dallas Fed Index (January) Earnings: AT & T , Nucor Tuesday, Jan. 28 8:30 a.m. Durable Orders (December) 9 a.m. FHFA Home Price Index (November) 10 a.m. Consumer Confidence (January) 10 a.m. Richmond Fed Index (January) Earnings: Starbucks , Boeing , Lockheed Martin , Royal Caribbean Group , Kimberly-Clark , General Motors , RTX , Synchrony Financial Wednesday, Jan. 29 2 p.m. FOMC Meeting 2 p.m. Fed Funds Target Upper Bound Earnings: ServiceNow , International Business Machines , Meta Platforms , Lam Research , Western Digital , Tesla , Microsoft , Hess , Corning , T-Mobile , Norfolk Southern , Raymond James Financial , Automatic Data Processing Thursday, Jan. 30 8:30 a.m. Continuing Jobless Claims (01/18) 8:30 a.m. GDP first preliminary (Q4) 8:30 a.m. Initial Claims (01/25) 10 a.m. Pending Home Sales (December) Earnings: Baker Hughes , Apple , Visa , Deckers Outdoor , Intel , PPG Industries , KLA , Sherwin-Williams , Altria Group , Comcast , Southwest Airlines , Quest Diagnostics , Valero Energy , PulteGroup , Caterpillar , United Parcel Service , Thermo Fisher Scientific , Tractor Supply , Northrop Grumman , Mastercard , Blackstone , L3Harris Technologies Friday, Jan. 31 8:30 a.m. ECI Civilian Workers (Q4) 8:30 a.m. PCE Deflator (December) 8:30 a.m. Core PCE Deflator (December) 8:30 a.m. Personal Consumption Expenditures price index (December) 8:30 a.m. Personal Income (December) 9:45 a.m. Chicago PMI (December) Earnings: Phillips 66 , Colgate-Palmolive , Exxon Mobil , Chevron , AbbVie