Global markets brace for pivotal week as mega-cap tech earnings, Fed meet loom

After days dominated by geopolitical tensions tied to US President Donald Trump’s Greenland ambitions and renewed tariff threats toward European allies, global markets are heading into a pivotal week shaped less by diplomacy and more by data, earnings and central bank signals.

A heavy slate of corporate results and a closely watched Federal Reserve interest rate decision promise to test investor nerves at a time when markets are already under strain.

Mega-cap tech earnings take centre stage

Four members of the so-called Magnificent Seven — Microsoft, Meta Platforms, Tesla and Apple — are scheduled to report quarterly earnings in the coming days.

Together, the group represents roughly $10 trillion in market capitalisation, accounting for about 16% of the S&P 500.

Their results arrive at a delicate moment.

US equities are mired in their weakest stretch since last summer, Treasury bonds have struggled to regain footing, gold has surged to test $5,000 an ounce for the first time, and geopolitical risks continue to loom large.

Against that backdrop, the first wave of mega-cap tech earnings in 2026 carries unusually high stakes.

Investors will be looking not only for strong results, but for reassurance that growth engines such as artificial intelligence spending can justify lofty valuations.

Artificial intelligence under the microscope

While the Magnificent Seven’s grip on day-to-day market direction has loosened, their influence remains significant.

Management commentary on AI demand, data centre investment and the path to profitability will be closely scrutinised.

A defining theme this earnings season is whether companies are beginning to see tangible returns from heavy investment in AI infrastructure.

Concerns that vast spending on data centres and related technologies would fail to deliver profits weighed on tech stocks late last year, after AI had powered much of the bull market’s earlier gains.

Brad Gastwirth, global head of research at Circular Technology, believes the tone may be shifting.

“This earnings season feels meaningfully different,” he said in a Wall Street Journal report, adding that companies are likely to emphasise growing AI pipelines, strong backlog visibility and tight supply chains as signs of durable growth rather than pulling back guidance due to macro uncertainty.

Others remain more cautious.

Lori Calvasina, head of US equity strategy at RBC Capital Markets, warned in the report that AI overspending and overhype remain risks, particularly given how close valuations and capital expenditure levels are to past peaks.

For now, she said, scepticism around the AI trade appears to be driving a healthy rotation and improved risk management within US equities.

Beyond Mag 7, earnings season to test market rotation, valuation

Beyond the headline tech names, just over 100 companies are set to report fourth-quarter results next week, offering fresh guidance on near-term prospects.

Their commentary could either reinforce or challenge the recent rotation away from technology and growth stocks toward more traditional value sectors.

The S&P 500, coming off its third consecutive year of double-digit gains, is up about 1% so far this year.

Valuations, however, remain elevated, with the index trading above 22 times expected earnings — well above its long-term average of 15.9.

“The earnings bar had better be met,” said Chris Galipeau, senior market strategist at Franklin Templeton, in a Reuters report, noting that stretched valuations leave little room for disappointment.

Federal Reserve decision looms

Earnings will share the spotlight with monetary policy.

The Federal Reserve is widely expected to hold interest rates steady when it concludes its two-day meeting on Wednesday.

The central bank cut rates by a quarter percentage point at each of its final three meetings of 2025, and futures markets are pricing in at least one more cut later this year, according to LSEG data.

Michael Pearce, chief US economist at Oxford Economics, expects an extended pause.

“With the fed funds rate close to neutral, easing labour market risks and inflation having peaked, there is little urgency to move,” he said.

However, the meeting is likely to be overshadowed by questions about the Fed’s political independence.

It follows reports that Fed chair Jerome Powell faced legal threats from the Trump administration — claims Powell dismissed as a pretext for pressuring the central bank into deeper rate cuts.

Trump is also weighing a nominee to replace Powell, whose term as chair ends in May, adding another layer of uncertainty to the policy outlook.

Alongside the Fed decision, investors will parse key jobs and inflation data and closely watch Treasury auctions totalling $183 billion, which could offer an early read on concerns around a potential “Sell America” trade.

Geopolitics remain a wildcard

Yet geopolitics remains an ever-present risk. Any escalation related to Greenland, tariffs, or other policy shocks could quickly sour sentiment.

“If the Greenland situation were to go off the rails, combined with tariff threats, that would certainly dent confidence and put markets under pressure,” Galipeau said.

As markets head into a dense and consequential week, investors are bracing for a stretch where earnings credibility, central bank resolve and political stability will all be tested at once.

The post Global markets brace for pivotal week as mega-cap tech earnings, Fed meet loom appeared first on Invezz