US Stocks Set for Pivotal Week as Tech Earnings and Fed Meeting Loom

U.S. Stock Rally Faces Test as Major Tech Companies Report Earnings

A scorching U.S. stock rally is set to face a major test next week as major technology companies, including Microsoft, Alphabet, Amazon, and Apple, report their first-quarter earnings. The rally, which has seen the benchmark S&P 500 rise about 13% since March 30, is expected to be put to the test as investors focus on the earnings reports of these tech giants.

The tech-heavy Nasdaq Composite has jumped more than 19% in the same span, with many analysts expecting strong profits this year to boost investors' bullish outlook for stocks. As of Friday, 81.3% of S&P 500 companies have posted earnings above analysts' expectations, with overall earnings expected to be up 16.1% in the first quarter, according to Tajinder Dhillon, head of earnings research at LSEG.

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More than one-third of the S&P 500 is set to post results next week alone, including five of the "Magnificent Seven" megacap companies. These companies have been among the signature stocks of the bull market that began more than three years ago. Investors will be focusing on their massive capital spending plans to build out data centers and other infrastructure to support artificial intelligence applications.

The Fed is widely expected to hold interest rates steady in its policy statement on Wednesday at the end of its two-day meeting, which could be the last with Jerome Powell as chair. The meeting also comes as the U.S. Justice Department closed its investigation into Powell over renovation costs of the Fed's headquarters, clearing a key obstacle for Kevin Warsh, President Donald Trump's pick as the next Fed chair, to take over.

Next week also features data on first-quarter U.S. economic growth, as well as the March Personal Consumption Expenditures Price Index, the Fed's preferred gauge for inflation. Both reports could offer insight into the Middle East conflict's economic fallout so far. The war remains a key issue for markets, with analysts warning that the longer the conflict goes, the greater the risk to the real economy, which will then translate into some potential pain and volatility for markets.