Week ahead: Tech titans to test market confidence as Microsoft, Meta, Tesla, and Apple report earnings
Published: 11:12 27 Jan 2025 EST
The 'Magnificent 7' tech giants will be in focus this week as more than half of the club – namely Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), Tesla Inc (NASDAQ:TSLA), and Apple Inc (NASDAQ:AAPL, ETR:APC) – will report earnings over the course of the week, amid heightened market scrutiny.
The tech-powered group, which has driven the S&P 500's gains over the past two years, faces growing challenges in 2025, with shares slipping and broader market participation expanding beyond tech.
Apple, the weakest performer in the group this year with a 12% decline, is under pressure due to slowing iPhone demand in China, though growth in services could offset some risks.
Meta, the year's top performer with a 10% gain, is investing heavily in AI with a 60% capex boost, but questions linger about its ability to monetize these investments, making it vulnerable to an earnings miss, according to Kathleen Brooks, research director at XTB.
On the economic front, Deutsche Bank expects the Federal Reserve to maintain its current interest rate policy during this week’s FOMC meeting, emphasizing patience in reducing restrictions given the economy's resilience and a stabilizing labor market.
Chair Powell is likely to avoid specific guidance on future rate cuts, though he may acknowledge dovish comments from some Fed officials while reiterating that cuts are unlikely to occur regularly this year.
The labor market remains a focal point, with recent data suggesting stabilization and reduced slack, supporting a measured approach.
Inflation data has been favorable, with softer readings in December CPI and PPI and signs of continued shelter disinflation. However, Powell is expected to stick with the narrative that inflation remains slightly elevated and progress uneven. Key economic reports, including GDP, employment costs, and core PCE inflation, are unlikely to significantly impact the Fed’s messaging but will shape forecasts.
Amid fiscal and trade policy uncertainties, Powell is expected to sidestep political issues, including President Trump’s demands for lower rates and potential tariff impacts.
Overall, Deutsche Bank believes the Fed is positioned to adopt a "wait-and-see" stance, maintaining flexibility amidst a steady economic backdrop.
