Dow Jones, Nasdaq, S&P 500 weekly preview: Spotlight on Big Tech earnings, FOMC

U.S. stocks edged higher on Friday, with Wall Street ending a volatile week on a high as investors assessed new U.S. inflation data.

The Dow Jones Industrial Average jumped 654.27 points, or 1.64%, closing at 40,589.34. The S&P 500 rose 1.11%, finishing at 5,459.10, and the Nasdaq Composite increased by 1.03%, ending at 17,357.88.

The gains were driven by a combination of oversold market conditions, a stronger-than-expected GDP report on Thursday, and expectations that the Federal Reserve might start cutting rates soon due to economic resilience.

Despite Friday's rally, the indexes still experienced losses for the week. The S&P 500 fell by 0.8%, while the Nasdaq dropped 2.1%, with both indexes recording back-to-back weekly declines for the first time since April.

Looking ahead to this week, key economic data releases this week include the JOLTS job openings report on Tuesday, the ISM manufacturing index on Thursday, and the employment report on Friday.

The July FOMC meeting is scheduled for Wednesday, with the much-anticipated post-meeting statement set to be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM.

“We think the July Federal Open Market Committee (FOMC) meeting that concludes Wednesday will signal that the Fed is on track to cut soon and open the door to a cut in September but will stop short of explicitly pre-signaling a rate reduction at that following meeting,” Evercore ISI strategists said in a note.

“We believe Powell will wait until Jackson Hole end August – by which time the Fed will have another month’s data – to deliver the explicit September cut signal,” they added.

It's that week of the Q2 earnings season

Apart from the FOMC’s statement, much of the market’s attention this week will be directed toward the Big Tech earnings results, with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN) all set to report in the coming days.

Wall Street analysts and investors are eager to gain insights into these tech giants' latest AI-driven capital spending and key trends in both enterprise and consumer technology expenditures.

For Apple, Barclays analysts expect a more favorable outlook for the September quarter, leading to upward revisions in estimates for iPhone, Mac, and Services, as well as their projections for fiscal 2025.

They said feedback from its Asia checks suggests better-than-expected September-quarter builds, with IP16 production in the low 20 million range. Late cycle demand for IP15 Pro models has slightly improved following WWDC due to their AI compatibility.

“The stock has already run in anticipation of iPhones bottoming and the upcoming ramp of AI features,” analysts added.

What analysts are saying about US stocks

Oppenheimer: "We remain positive on equities and continue to see fixed-income securities as complimentary to stocks in providing portfolio diversification. Some near-term profit-taking in the day-to-day action of the market particularly in segments of the market that have had exceptional run-ups since last year into this year should be expected and continues to appear to us quite normal. Such activity combined with a process of rebalancing and rotation into other segments of the stock market in our view can be healthy and should contribute to the broadening of the markets’ progress that began last year and becomes more evident in the second half of this year."

UBS: “Following an impressive run since late last year, investors have increasingly become concerned about the pace and timing of artificial intelligence (AI) revenue and what it may mean for continued investments in AI infrastructure. With results still due from some big firms this week, market volatility is likely to continue. But we think the tech sector should find support in the coming weeks and resume its leadership. In fact, the recent pullback creates a re-entry opportunity, in our view, especially for those companies with strong earnings growth visibility."

BTIG: “We can probably drift a bit higher on SPX towards its gap at 5550, before moving lower to fill a gap at 5375. Internally, the rotations remain vicious. The 12-day rate-of-change for RTY vs. NDX is over 20%. Since 1985, that ranks as the 5th biggest such move ever, only eclipsed by a few days in December 2000 and Jan. 2nd, 2001. Tactically we think a 'reversal of that reversion' is likely, with semis (SMH) oversold into support while homebuilders (ITB) are overbought and rallying on anticpated rate cuts, when in fact higher rates were part of their bull thesis over the last couple of years. We are also seeing breakouts among the defensive stocks, and areas like staples, utlities, REITs, and healthcare all look strong."

Strategas: "On average, the market bottoms 213 days later and 23% lower after the first Fed cut in a series of rate cuts. S&P 500 operating earnings decline by about 10% on average in the 12 months following the first easing. In short, be careful what you wish for when it comes to an easing of monetary policy. There is, naturally, a chance, broadly supported by recent policy, that policymakers have decided to effectively “outlaw” recessions. While it seems appealing, such an approach makes it difficult to control inflation. What we don’t know is whether the fact that President Biden is not seeking reelection weakens his resolve or urgency in providing stimulus for the broader economy in the months leading up to the election."

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