Market Performance

The S&P 500 declined modestly last week. The Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA), outperformed the market. Small-cap stocks paced the S&P 500 this week but have made a strong showing so far this year.

Defensive stocks outperformed more economically sensitive cyclical stocks, while the Polymarket odds of the US recession in 2026 rose modestly to 22%.

While there seems to be some slight increased risk of recession priced into stocks, the bond market spreads, the cost of corporate borrowing over US Treasury yields, is not signaling any significant increase in recession concerns.

Magnificent 7

Because technology companies are critical drivers of earnings growth and account for a significant percentage of the S&P 500’s market capitalization, the Magnificent 7 remains the group to watch this earnings season.

Four of the Magnificent 7 companies are scheduled to report results this week: Tesla (TSLA), Microsoft (MSFT), and Meta Platforms (META) on Wednesday after market close, then Apple (AAPL) on Thursday after the close.

Earnings Insights By Sector

Positive earnings revisions within the materials, consumer discretionary, and financial sectors were offset by downward revisions in the health care, utilities, and energy sectors.

Revenue Results By Sector

Better-than-expected sales growth in the technology and industrials sectors was offset by reductions in utilities and energy, leaving expected revenue growth unchanged last week and equal to the expectations at the end of the quarter, according to FactSet.

What To Watch This Week

Earnings should be the main event for the week. With mega-cap technology stocks expected to drive the earnings growth for this quarter’s results and for 2026, the earnings reports and forward guidance for the four magnificent 7 companies reporting this week, Tesla (TSLA), Microsoft (MSFT), Meta Platforms (META), and Apple (AAPL), will be crucial.

The Federal Reserve (Fed) meets on Wednesday, but the outcome will hold no suspense. As widely expected, there will be no rate cut at this meeting. Rather, the focus will be on Chair Powell’s commentary on the timing of the next possible rate cut. Further, Powell could comment on Fed independence in the wake of the US Department of Justice’s probe into his conduct.

Policy rumblings remain a possibility this week, including Iran, Cuba, and President Trump’s pick for the next Fed Chair, which could impact markets. The Supreme Court’s upcoming ruling on tariffs could be delayed until their next session on February 20, unless a rare special session is called. Government funding for some parts of the government expires on Friday, but a partial government shutdown seems unlikely, though winter weather might complicate things.