The S&P 500 (SNPINDEX: ^GSPC) is widely considered the best gauge for the overall U.S. stock market. The index surged 23% in 2024 as investors reacted to the strong economy and excitement about artificial intelligence, and it has already advanced another 2% in 2025 for similar reasons.
However, the U.S. stock market could move sharply on Jan. 29 and Jan. 30 based on commentary from the Federal Reserve, and earnings results from several “Magnificent Seven” companies: Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Tesla (NASDAQ: TSLA). Read on for details.
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The Federal Reserve wraps up a two-day meeting on Jan. 29
The Federal Reserve has made dramatic changes to its economic outlook in recent months. In September, policymakers anticipated four quarter-point interest rate cuts in 2025, reflecting expectations that inflation would continue falling, gross domestic product (GDP) growth would slow to 2%, and unemployment would increase to 4.4% in 2024.
Inflation has since reaccelerated, and the economy and labor market have proven more resilient than Federal Reserve officials projected. GDP growth accelerated to 3% in the second quarter and 3.1% in the third quarter, and unemployment never topped 4.2% last year. So policymakers revised their outlook at the December meeting. They now expect only two quarter-point interest rate cuts in 2025.
However, since the last meeting, new data showed that inflation accelerated in November, hitting its highest level since July 2024. And the economy added 256,000 jobs in December, crushing the consensus estimate of 160,000. That information may cause the Federal Reserve to revise its outlook once again. Investors will get more information when the two-day meeting wraps up on Jan. 29.
Importantly, interest rate cuts encourage consumer spending and business investments, which promote economic expansion. Consequently, lower interest rates tend to send the stock market higher. So, any sign that policymakers anticipate fewer rate cuts in 2025 could send the stock market lower.
Image source: Getty Images.
Several “Magnificent Seven” companies report earnings on Jan. 29 and 30
The U.S. stock market faces another potential inflection point in the next two days in that four “Magnificent Seven” companies are scheduled to report earnings results. Specifically, Meta Platforms, Microsoft, and Tesla will announce earnings after the market closes on Jan. 29, and Apple will deliver its report after the market closes on Jan. 30. Details are provided below:
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Meta Platforms: Wall Street expects revenue to increase 17% to $47 billion, while earnings increase 27% to $6.78 per diluted share. Certain analysts believe Meta is better monetizing artificial intelligence (AI) than other big technology companies, so investors should look for commentary about how AI is boosting engagement with its social media properties.
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Microsoft: Wall Street forecasts revenue will increase 11% to $68.8 billion, while earnings increase 6% to $3.12 per diluted share. Investors should look for details concerning how effectively the company is monetizing AI software (like Microsoft 365 Copilot) and AI cloud services. In October, CEO Satya Nadella said, “Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone.”
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Tesla: Wall Street expects revenue to increase 8% to $27.1 billion, while earnings increase 6% to $0.75 per diluted share. Tesla earlier this month reported its first annual decline in deliveries in company history. Additionally, CEO Elon Musk last quarter said the company would introduce a low-cost electric car in the first half of 2025, and launch a ride-hailing service in California and Texas this year. Investors should look for more details.
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Apple: Wall Street expects revenue to increase 4% to $124 billion, while earnings increase 8% to $2.35 per diluted share. Investors should pay close attention to commentary about Apple Intelligence. Many analysts expected a massive iPhone upgrade cycle following the launch of artificial intelligence features, but that has yet to happen.
The earnings events listed above have direct and indirect consequences for the stock market. By that I mean Meta Platforms, Microsoft, Tesla, and Apple collectively account for about 18% of the S&P 500. So, the entire stock market could rise or fall depending on how investors react to their earnings.
Additionally, those four companies play critical roles in the AI economy. Any context their management teams provide about AI investments and monetization could indirectly impact the market by influencing the share price of other stocks, like Nvidia, Amazon, and Alphabet. Importantly, those three companies account for 15% of the S&P 500, which means they could also move the entire stock market.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
