The S&P 500 has enjoyed a solid three-year bull market, increasing by 17% this year alone, despite grappling with economic challenges posed by the trade policies of the Trump administration. However, the market’s forward momentum could be tested this week as several key events unfold.
First on the agenda is the Federal Reserve’s highly anticipated interest rate decision, which will be announced on October 29 at 2 p.m. ET following a two-day meeting. Fed Chair Jerome Powell is expected to offer insights into monetary policy shortly thereafter. Last month, the Fed cut its benchmark interest rate by a quarter of a percentage point, marking the first reduction since December 2024. This decision came after a nine-month period of steady rates, during which policymakers sought clarity on the impacts of the administration’s trade policies on the economy.
The complexities surrounding the trade tariffs have led to a dual economic impact: rising inflation and a weakening jobs market. These opposing forces have compelled the Federal Reserve to prioritize between maintaining price stability and maximizing employment. In September, policymakers opted to prioritize labor market health, but there’s growing concern among economists that consumer prices may rise in the coming months as businesses adjust to increased costs from tariffs.
Investors are widely anticipating another quarter-point rate cut in October, with projections for a similar reduction in December. Should the Federal Reserve diverge from this expected trajectory, the stock market may react unfavorably.
Additionally, the earnings reports from major technology firms are poised to influence market trends. Five companies from the so-called “Magnificent Seven” will share their quarterly financial results on October 29 and 30, accounting for approximately 25% of the S&P 500’s weight.
The anticipated earnings figures include:
- Alphabet: Revenue expected to rise by 6% to $93.9 billion, with earnings projected to increase 7% to $2.27 per share.
- Meta Platforms: Revenue forecast to grow by 22% to $49.4 billion, with earnings expected to reach $6.68 per share, an 11% increase.
- Microsoft: Anticipated revenue of $75.2 billion, a 15% hike, with earnings expected at $3.66 per share, an 11% rise.
- Amazon: Expected to report revenue growth of 12% to $177.8 billion, with earnings anticipated to reach $1.58 per share, up 10%.
- Apple: Projected revenue increase of 7% to $101.8 billion, and earnings expected to rise to $1.76 per share, also a 7% increase.
The upcoming announcements will be closely scrutinized, particularly regarding investments in artificial intelligence (AI). While consumer spending remains the largest component of GDP, capital expenditure linked to AI has been identified as a significant driver of economic growth in early 2025. Signs of conservative spending from these tech giants or a failure to capitalize on previous AI investments could raise concerns about overall economic strength, potentially impacting market performance.
With the S&P 500 currently trading at 22.7 times forward earnings—a notable premium above its ten-year average of 18.6 times—any indications that profit margins may be pressured by tariffs could trigger negative market reactions. Conversely, if companies report strong earnings along with optimistic guidance, it could bolster the bull market and propel the S&P 500 to new highs.
