The second busiest week of fourth-quarter earnings season is underway, with 103 S&P 500 companies scheduled to report their financial results. Most significantly, four members of the Magnificent 7 tech giants will release their quarterly earnings this week, making big tech earnings a central focus for investors and market watchers. According to FactSet, 75% of S&P 500 companies that have reported so far are beating consensus estimates, setting a positive tone for the remainder of the season.
Tesla, Microsoft, and Meta Platforms are scheduled to announce their results on Wednesday after market close, followed by Apple on Thursday. Additionally, major corporations including Boeing, General Dynamics, Starbucks, ServiceNow, Mastercard, Sherwin-Williams, Honeywell International, and ExxonMobil will report their financial performance during the week.
Big Tech Earnings Drive Market Expectations
The importance of big tech earnings cannot be overstated, as technology companies represent a significant percentage of the S&P 500’s market capitalization and are critical drivers of overall earnings growth. According to data from Glenview Trust and FactSet, the S&P 500’s blended earnings growth rate for the fourth quarter stands at 8.2% year-over-year, slightly below the 8.3% expectations recorded at the end of the quarter. However, the expected earnings growth rate for calendar year 2026 is projected at a robust 14.7%.
The Magnificent 7 group, consisting of Microsoft, Meta Platforms, Amazon.com, Apple, NVIDIA, Alphabet, and Tesla, outperformed the broader market last week despite a modest decline in the S&P 500. These technology sector earnings will be particularly crucial as mega-cap technology stocks are expected to drive earnings growth for both this quarter’s results and throughout 2026.
Market Performance and Recession Concerns
Market performance last week showed interesting divergences, with defensive stocks outperforming more economically sensitive cyclical stocks. Meanwhile, small-cap stocks paced the S&P 500 for the week and have demonstrated strong performance so far this year. The Polymarket odds of a US recession in 2026 rose modestly to 22%, according to the report.
However, the bond market is not signaling significant recession concerns. Corporate bond spreads, which measure the cost of corporate borrowing over US Treasury yields, remain stable and do not indicate any major increase in economic distress expectations. This suggests that while some investors are pricing in slightly elevated recession risk through equity positioning, fixed income markets remain relatively calm.
Sector Performance and Revenue Trends
Earnings revisions varied across sectors during the past week. Positive earnings revisions within the materials, consumer discretionary, and financial sectors were offset by downward revisions in the health care, utilities, and energy sectors, according to FactSet. Additionally, better-than-expected sales growth in the technology and industrials sectors was offset by reductions in utilities and energy, leaving expected revenue growth unchanged from end-of-quarter expectations.
The technology sector continues to demonstrate strength, with artificial intelligence investments and cloud computing services driving revenue expectations. In contrast, the energy sector has faced headwinds amid fluctuating commodity prices and shifting demand patterns.
Federal Reserve Meeting Adds to Market Focus
Beyond corporate earnings reports, the Federal Reserve meets on Wednesday, though no rate cut is expected at this meeting. The focus will be on Chair Jerome Powell’s commentary regarding the timing of potential future rate cuts. Powell may also address questions about Fed independence following recent scrutiny. Market expectations currently suggest limited rate cuts in the near term, according to Bloomberg data.
Policy developments remain a possibility this week, including potential announcements related to international relations and the President’s pick for the next Fed Chair. The Supreme Court’s upcoming ruling on tariffs could be delayed until February 20 unless a special session is called. Government funding for certain departments expires Friday, though a partial government shutdown appears unlikely despite potential complications from winter weather conditions.
Investors will closely monitor the quarterly results and forward guidance from the four Magnificent 7 companies reporting this week, as their performance and outlook will likely set the tone for technology sector expectations throughout 2026. The outcomes of these earnings announcements and the Federal Reserve meeting will provide crucial signals for market direction in the coming months.
