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

NEW YORK – Investors are bracing for what is set to be the most consequential week of the first quarter, as a deluge of earnings from technology titans converges with a pivotal Federal Reserve policy meeting. This follows a period of mounting caution in markets, which capped a second consecutive week of losses amid unsettling geopolitical signals and a notable flight from the US dollar.

The week ahead will serve as a critical test for a market rally that has been largely powered by AI-driven optimism and the perceived resilience of the US economy. Traders will be parsing every data point, from corporate spending on artificial intelligence to the central bank's monetary policy outlook, searching for direction in an increasingly complex global landscape.

Markets Enter Key Week on a Cautious Note

US equities ended last week in the red, reflecting a growing sense of investor unease. The major averages failed to find footing as geopolitical headlines from the World Economic Forum in Davos and shifts in currency markets weighed on sentiment.

• S&P 500 (^GSPC): The broad-market index finished the week down 0.4%, despite a marginal gain on Friday.
• Dow Jones Industrial Average (^DJI): The 30-stock index posted the largest weekly loss, falling 0.7%.
• Nasdaq Composite (^IXIC): The tech-heavy index shed approximately 0.1% for the week, even with a 0.3% rally to close out Friday's session.

The breakout action was found not in equities, but in commodities. Natural gas futures (NG=F) provided the week's most dramatic move, spiking an astonishing 75% over five sessions leading up to Thursday. The surge was driven by Winter Storm Fern, which has brought Arctic temperatures and severe weather to over 150 million people across the United States, drastically increasing demand for heating fuel.

The Fed: All Eyes on Powell's Successor

The Federal Reserve's first meeting of 2026 concludes on Wednesday, and while the policy decision itself is widely seen as a foregone conclusion, the event's subtext carries significant market implications.

• Interest Rate Decision: Markets are pricing in a 97% probability that the Federal Open Market Committee (FOMC) will hold its benchmark interest rate steady in the current range of 3.5%-3.75%, according to CME Group data. The focus will be on the committee's statement and any forward guidance on the path of monetary policy.

• The Succession Race: The larger story for the Fed is the developing race to succeed Chair Jerome Powell, whose term expires in May. President Trump's eventual nominee will have a profound impact on the central bank's direction. According to prediction market Polymarket, a new favorite has emerged.

The Contenders for Fed Chair

Speculation over the next leader of the world's most influential central bank is intensifying.

• The Front-Runner: Rick Rieder, BlackRock's Chief Investment Officer for Global Fixed Income, has surged to become the favorite to receive the nomination from President Trump. His odds on Polymarket have risen sharply. Speaking in Davos, Trump told CNBC he found Rieder "very impressive."

• The Former Favorites: Kevin Warsh, a former Fed official, and Kevin Hassett, Trump's top economic advisor, have seen their odds slip. As of Friday, they stood at 33% and 6%, respectively, having long been considered the leading candidates.

Big Tech Earnings: The AI Arms Race Heats Up

Investor attention will be fixated on fourth-quarter results from four members of the "Magnificent Seven," with reports from Microsoft, Meta, and Tesla on Wednesday, followed by Apple on Thursday. The central theme will be the staggering cost of competing in the new AI paradigm.

Analysts and investors will scrutinize capital expenditure guidance to gauge how aggressively these giants are investing in the infrastructure needed to power their AI ambitions.

• Microsoft (MSFT): In October, CFO Amy Hood signaled that the company's capital expenditures in 2026 would exceed the $88.2 billion spent in 2025, driven by investments in its Azure cloud and AI services.

• Meta (META): CFO Susan Li previously raised the company's spending projections for the year, bumping the forecast from a range of $66 billion-$72 billion to a new range of $70 billion-$72 billion, primarily for servers, data centers, and the AI buildout.

The remaining "Magnificent Seven" members—Amazon (AMZN), Alphabet (GOOGL), and Nvidia (NVDA)—are expected to report their results in the following weeks.

A Fracturing World: The Dollar Loses its Luster

While stocks and earnings have dominated headlines, a significant shift has been occurring in foreign exchange markets. The US dollar has weakened against several key currencies, a trend that accelerated following the World Economic Forum in Davos.

The forum revealed a growing "schism" between the US and some of its primary Western allies. While President Trump and European leaders announced the "framework" of a deal to avert tariffs over Greenland, the underlying tensions were palpable.

This environment is fueling a search for safe havens outside the dollar, according to Thierry Wizman, global FX & rates strategist at Macquarie.

"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," Wizman wrote to clients. "While a Greenland 'deal' solves the immediate problem of tariffs and/or invasion, it doesn't solve the core issue of the seeming mutual alienation of the US from its allies."

This sentiment is reflected in recent currency movements:

• Hedging Instability: The dollar has fallen over 2.7% against the Swiss franc, a traditional safe-haven currency that traders flock to during periods of systemic risk.
• Yen's Surge: The dollar also dropped approximately 1.8% against the Japanese yen, which saw a strong bid through the end of the week.
• Euro Strength: The EUR/USD pair, the world's most traded currency pair, saw the euro gain nearly 2% against the dollar over the last five days.

The Bottom Line: What to Watch

The week ahead presents a critical juncture for investors. The market is caught between the powerful narrative of a technology-led productivity boom and the sobering reality of a shifting geopolitical order, coupled with uncertainty over the future of US monetary policy.

The key question is whether blowout earnings and bullish AI guidance from Big Tech can reignite animal spirits and overpower the macroeconomic and geopolitical headwinds. The Fed's commentary on the economy and any further signals from the White House on the next Fed Chair will be just as crucial. Investors will be watching to see if the dollar's recent weakness is a temporary blip or the start of a more sustained trend in a world seeking to diversify away from US-centric assets.

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Image Caption: President Donald Trump, center, holds up a signed Board of Peace charter during the Annual Meeting of the World Economic Forum in Davos, Switzerland, Thursday, Jan. 22, 2026. (AP Photo/Evan Vucci) · ASSOCIATED PRESS