Big Tech earnings, Fed meeting feature as markets end January with busiest week of Q1: What to watch

NEW YORK – Wall Street is bracing for what is set to be the most consequential week of the first quarter, as investors navigate a collision of critical economic policy decisions and a deluge of earnings from the market's most influential technology titans. After a week of losses driven by geopolitical jitters, the focus now shifts squarely to the Federal Reserve's first policy meeting of 2026 and fourth-quarter results from four members of the "Magnificent Seven," which will set the market's tone for weeks to come.

The major U.S. indexes capped a second consecutive week of declines, reflecting an unsettled trading environment. Geopolitical headlines from the World Economic Forum in Davos, Switzerland, combined with volatile commodity action, kept investors on edge.

• S&P 500 (^GSPC): The broad market index lost 0.4% for the week, ending Friday's session nearly flat.
• Dow Jones Industrial Average (^DJI): The Dow saw the steepest decline, falling 0.7% over the five-day period.
• Nasdaq Composite (^IXIC): Despite a 0.3% gain on Friday, the tech-heavy index shed 0.1% for the week.

The Main Event: Fed Policy and Big Tech Collide

All eyes will turn to Washington and Silicon Valley this week. The Federal Reserve's two-day policy meeting concludes Wednesday, the same day Microsoft and Meta will report earnings. This confluence of events guarantees a period of heightened volatility as markets digest monetary policy signals alongside corporate performance.

The Federal Reserve's Next Move

While the Federal Reserve is widely expected to keep its benchmark interest rate unchanged, the real story lies in the future leadership of the central bank.

• Rate Expectations: Markets are pricing in a 97% probability that the Fed will hold interest rates steady in their current range of 3.5%-3.75%, according to CME Group data. Traders will parse the policy statement for any shifts in language regarding future cuts.

• The Succession Race: The more significant development is the intensifying speculation over who will succeed Jerome Powell when his term as Fed Chair ends in May. President Trump's eventual nominee will have a profound impact on future monetary policy. Rick Rieder, BlackRock's global CIO for fixed income, has emerged as the frontrunner, according to prediction market Polymarket, with his odds surging after President Trump called him "very impressive" in Davos.

• The Contenders: As of Friday, Rieder was the favorite for the nomination. Former Fed official Kevin Warsh and Trump's top economic advisor, Kevin Hassett, who were long considered leading candidates, have seen their odds fall to 33% and 6%, respectively.

"Magnificent Seven" on Deck

Investor attention will be fixated on fourth-quarter results from the technology behemoths that have driven market gains. The central theme will be the staggering cost of the artificial intelligence arms race and its impact on future profitability.

• Reporting Schedule: Microsoft (MSFT), Meta (META), and Tesla (TSLA) are all set to report after the market closes on Wednesday. Apple (AAPL) will follow after Thursday's bell.

• Key Investor Question: Markets will scrutinize capital expenditure guidance. The core debate is how these giants plan to fund their massive AI and cloud computing ambitions and what the timeline for a return on that investment looks like.

AI Spending Under the Microscope

When Microsoft and Meta report on Wednesday, their spending projections will be as important as their revenue figures. Both companies have already signaled that expenditures will continue to climb in 2026.

Microsoft CFO Amy Hood previously stated that the company's capital expenditures in 2026 would exceed the $88.2 billion spent in 2025. Similarly, Meta CFO Susan Li revised the company's spending outlook upward in October, from a range of $66 billion-$72 billion to a tighter $70 billion-$72 billion, largely to support its AI initiatives. Investors will be listening for any further revisions to these colossal figures.

Shifting Sands in Global Markets

Last week's market action was heavily influenced by the World Economic Forum in Davos. While President Trump and European leaders announced the "framework" of a deal averting tariffs over Greenland, the gathering also highlighted a growing divide between the U.S. and its traditional allies.

This sentiment is beginning to ripple through currency markets, which have largely taken a backseat to equities since the post-pandemic rally began.

"It's in that spirit that we can still talk about a fracturing, more dangerous, world, in which the US is less vaunted, the USD loses its reserve currency status, and where the US focuses instead on the Western Hemisphere as its sole and defendable redoubt," wrote Thierry Wizman, global FX & rates strategist at Macquarie, in a note to clients.

Wizman argues that while the Greenland agreement solves an immediate problem, it fails to address the "core issue of the seeming mutual alienation of the US from its allies."

The Dollar's Quiet Retreat

This sense of global instability and shifting alliances is manifesting in foreign exchange markets, where traders appear to be actively seeking safe havens outside of the U.S. dollar.

• Hedge Against Instability: The dollar has fallen more than 2.7% against the Swiss franc (CHF), a traditional safe-haven currency that investors flock to during times of systemic risk.

• Yen Strength: The dollar also slid approximately 1.8% against the Japanese yen (JPY), another classic safe haven, which surged toward the end of the week.

• Euro Gains: The EUR/USD pair, the world's most traded currency pair, saw the euro strengthen by nearly 2% against the dollar over the last five days.

Natural Gas Jolts the Market

The week's most dramatic price action occurred not in equities but in commodities. Natural gas futures (NG=F) spiked an astonishing 75% in the five trading sessions leading up to Thursday. The surge was a direct result of Winter Storm Fern, which has brought Arctic temperatures and severe weather to over 150 million people across the United States, driving unprecedented demand for heating fuel.

The Bottom Line

Investors are entering a pivotal week at a crossroads. The market's short-term direction will be determined by the Federal Reserve's forward guidance and, more critically, by whether the Magnificent Seven's earnings and outlooks can justify their premium valuations and the massive AI spending they have planned.

Beyond the numbers, the undercurrents of geopolitical tension and a weakening dollar suggest a more complex and fractured global landscape is emerging. This week’s data will provide the first major test of whether AI-driven optimism can continue to outweigh growing macroeconomic and geopolitical uncertainty.