Next week is shaping up to be the biggest of 2024 so far. Wall Street is entering the heart of earnings season, with results on the table for most of the so-called Magnificent Seven names. These companies face high hurdles in trying to justify their valuations after the recent rally. Alphabet, Apple, Amazon, Meta Platforms and Microsoft are ready to report. Beyond that, the focus will be on the Federal Reserve’s latest monetary policy decision and the January jobs report. Mega-cap tech results will be especially important for investors who have been looking for signs of a widening rally in 2024, only to be disappointed so far. While tech giants like Nvidia are up another 23% this year, the small-cap Russell 2000 is down more than 2%. “These earnings are particularly important because we continued to see, although we expected a rotation, we are still seeing strong performance in technology and communications services stocks for the start of the year,” said Shannon Saccocia, managing director in charge of investments at NB Private Wealth. As it stands, some fear that the broader market’s failure to catch up with megacap stocks could suggest that the recent rally won’t be sustainable for much longer. “At some point we continue to believe that something has to happen,” BTIG’s Jonathan Krinsky wrote on Thursday. “The longer this divergence lasts, the more violent its resolution is likely to be. When there are fewer names supporting the indexes, a downturn can be quite violent.” Stocks faltered on Friday, but remained on track for a solid weekly performance. The three major average indexes – the S&P 500, Dow Jones Industrial Average and Nasdaq Composite – are headed for their twelfth winning week out of 13. The S&P 500 and Nasdaq are up about 1%, while the Dow is up 0.5 %. No room to disappoint Mega-cap tech companies will report next week that they have a lot to live up to as investors fear they’ve reached too high, too fast with their AI dreams. Tesla posted weaker-than-expected results on Wednesday, sending the stock down more than 14% for the week. After the results were released, JPMorgan cut Tesla’s price target to $130 – implying a decline of about 30% from Thursday’s close – saying the company’s price cuts on its electric vehicles are denting earnings. profits. “There’s not a lot of room for them to disappoint. We’ve seen that with Tesla, and it will be the case with all the Mag Seven names in general,” said Art Hogan, chief market strategist at B. Riley Securities. “When you’ve had the kind of moves that these names have had, you tend to have a greater propensity to overreact downside to something that’s in line or modestly negative, versus having a big reaction upside if you actually beat,” Hogan added. Disappointing results would pose a major headwind for stocks, as megacap tech accounts for much of the S&P 500’s market capitalization, providing an opportunity elsewhere in the market. “I think it’s a real opportunity, at least next week, for a little bit of a resurgence, maybe in those value stocks versus the really expensive growth stocks, depending on what kind of outlook they offer for 2024,” said John Bailer, portfolio manager . at Newton Investment Management. “So, I think this could be a big driver for market activity going forward.” Federal Reserve Meeting Investors aren’t expecting much from next week’s Fed meeting. According to the CME’s FedWatch tool, markets are pricing in near certainty that the central bank will keep rates stable at its January meeting. There will be no new summary of the meeting’s economic projections to give a sense of the number and timing of interest rate cuts this year. However, Fed Chair Jerome Powell is expected to maintain an aggressive stance and dismiss hopes of a rate cut as early as March, according to Tony Welch, chief investment officer at Signature FD. While markets currently have a 46% chance of a quarter percentage point cut in March, Welch expects the Fed’s first cut to come in June. “By the time we get to the June meeting, if trends continue as they are, we’ll probably have a weaker inflation number, probably further weakening in the labor market, and that’s probably where they have the cover to cut for the first time, ” Welch said. As it stands, investors have received more encouraging news on the inflation front. Last week, the Personal Consumption Expenditures report, known as the Fed’s preferred measure of inflation, and the PCE in Thursday’s GDP report continued to confirm the downward trend in inflation. January Jobs More clues about the cooling job market will come next week in the form of January jobs numbers, due out Friday. Market participants say recent reports show trends are going in the right direction, and Friday’s report is expected to confirm the weakening job market. Economists polled by FactSet forecast that the United States will have added 170,000 nonfarm workers, down from 216,000 the previous month. The unemployment rate is expected to have risen to 3.8%, from 3.7% previously. Other significant gains in the coming week include Boeing, a major component of the Dow. Investors will be closely scrutinizing how the company’s management plans to deal with the fallout from the Alaska Airlines emergency earlier this month that grounded its 737 Max 9 planes. January’s consumer confidence report will also be published next week. Next week’s calendar All times ET. Monday 10:30am Dallas Fed Index Earnings: Whirlpool Tuesday 9:00am FHFA Home Price Index (November) 9:00am S&P/Case-Shiller comp.20 HPI (November) 10:00am Consumer Confidence (January) 10:00 AM JOLTS Jobs (December) Earnings: Marathon Petroleum, United Parcel Service, General Motors, Pfizer, Advanced Micro Devices, Alphabet, Starbucks, Microsoft Wednesday 8:15 AM ADP Employment Survey (January) 8:30 AM ECI Civilian Workers (Q4) 9:45 AM Chicago PMI (January) 2:00 PM FOMC Meeting 2:00 PM Fed Funds Target for Upper-Bound Earnings: Boeing, Mastercard, Qualcomm Thursday 8:30 AM Continuing Jobless Claims ( 1/20) 8:30am Initial Claims (1/27) 8:30am Preliminary Unit Labor Costs (Q4) 8:30am Preliminary Productivity (Q4) 9:45am Final Markit PMI Manufacturing (January) 10: 00 Construction Spending (December) 10:00 am ISM Manufacturing (January) Earnings: Meta Platform, Amazon, Apple, Royal Caribbean, Clorox Friday 8:30 am Employment Report (January) 10:00 am Durable Orders (December) 10:00 am Factory Orders (December) 10:00 am Michigan Sentiment final (January) Earnings: Chevron, Exxon Mobil