Stocks drifted higher to start the week, with the S&P 500 adding 0.70% and the Nasdaq Composite gaining 0.82%, as traders positioned for a 48-hour stretch beginning Wednesday that pairs a Federal Reserve rate decision with earnings from two of the market's most important companies on the same afternoon.
The Fed's Open Market Committee began its two-day meeting Tuesday and is due to announce its rate decision Wednesday at 2pm ET, followed by a press conference from the chair thirty minutes later. The central bank raised its benchmark rate by a quarter point in September, its first hike since 2023, lifting the target range to 3.75%-4.00%; most traders now expect the Fed to hold steady this time, according to futures pricing, though a recent run of firmer inflation data has kept the odds of a further move very much alive heading into the announcement.
Big Tech reports into the decision
Minutes after the Fed wraps its press conference Wednesday, Microsoft and Alphabet are both scheduled to report quarterly results after the closing bell — Microsoft's fiscal first quarter and Alphabet's third calendar quarter — making for an unusually concentrated afternoon of market-moving news. Amazon follows with its own report Thursday evening, while Apple, which closed out its fiscal year in September, isn't due to report until November 2. Meta and Tesla already reported their results last week.
All three of this week's reporting companies have poured tens of billions of dollars into AI infrastructure over the past year, and investors have grown increasingly sensitive to how that spending is described on earnings calls. A strong quarter paired with confident capital-expenditure guidance has been enough to lift shares sharply in recent quarters; a wobble on the same numbers has just as often triggered an outsized selloff, given how much of each company's market value now rests on the AI narrative holding up.
A market that has priced in a smooth landing
Equities have climbed steadily for much of the autumn on a mix of resilient corporate earnings and expectations that the Fed is done tightening for now, leaving relatively little room for disappointment this week. A hawkish surprise from the Fed, a soft earnings report from either Microsoft or Alphabet, or both at once, would test a market that has largely assumed the best case on both fronts. Treasury yields have been comparatively calm heading into the announcement, a sign that bond investors, too, are leaning toward a Fed that holds rates unchanged rather than resuming hikes.
Currency and commodity markets were comparatively quiet Monday ahead of the Fed decision: the dollar firmed modestly against the euro, while Brent crude ticked up on continuing supply concerns tied to tensions in the Middle East. Traders said they expect both markets to stay in a holding pattern until the Fed's statement and the first wave of Big Tech results are in hand Wednesday evening.
