If you ever ask a market veteran which is the most important, trend-defining week, it would be this one. In the next 4 trading days, we will hear from ~20% of the S&P 500 reporting their previous quarter's earnings, and also from the Federal Reserve regarding interest rate hikes.

The major averages rallied in the past week as the pace of earnings releases picked up and the results thus far have largely been better than feared. But this week is the true test: we will hear from the mega cap stocks (AAPL, AMZN, GOOGL, MSFT) that account for roughly 20% of the S&P 500 by market cap. Moreover, given the importance of these four names in terms of the global economy, the results and commentary on the conference calls will have ripple effects and no doubt influence the direction of the next material move for the major averages. 

At the macroeconomic level, this week also brings some key reports that will certainly play into the action. On Wednesday, we have the FOMC meeting; according to the CEM FedWatch Tool, investors are currently pricing in a nearly 80% chance for a 75 basis-point hike and a 20% chance for a 100 basis-point hike. On Thursday we will get our first read on the second quarter gross domestic price index. If that comes in negative (Wall Street is currently expecting an increase), we will have officially entered recession territory as defined as two successive quarters of contraction. Again, not the base case, but we were also caught off-guard with a contraction in the first quarter, so something to keep a close eye on as the report will come on the back of the FOMC meeting.

Bottom Line

We advise investors to be disciplined yet opportunistic this week. Do not chase stock's move up without consideration for discipline. For example, if you see AAPL moves up 5% after-earnings, do not go buy and hope it will rally another 10%. Also, do not be fearful and look out for opportunities. For example, Snapchat (SNAP) reported last Friday and brought down the entire tech universe, especially Meta Platforms (META) and Alphabet (GOOGL). However, Meta and Google cannot be more different from Snapchat in terms of business operation, performance, cash flow and valuation. As a result, an opportunistic investor would use the sector-wide decline to add to Meta or Alphabet. 

Detailed Schedule

Tuesday - after close: Microsoft (MSFT) and Alphabet (GOOGL). 

Wednesday - after close: Meta Platforms (META) and Ford (F) 

Thursday - after close: Apple (AAPL) 

Friday - before open: Chevron (CVX) and AbbVie (ABBV)