Tesla, Alphabet Earnings Set the Tone as Markets Hold Steady
With Tesla and Alphabet preparing to unveil their earnings this week, all eyes are on Big Tech’s role in sustaining market momentum. The stock market, driven by investor optimism and solid second-quarter results, remains perched near record highs—despite mounting economic uncertainty and wavering hopes for interest rate cuts.
Both the S&P 500 and Nasdaq Composite ended last week with gains, as earnings reports and cautious Federal Reserve commentary gave traders reason to stay bullish. This week, the focus shifts squarely to tech giants like Tesla and Alphabet, whose performance could either strengthen the rally or pull sentiment back to earth.
Markets Stay Strong as Wall Street Eyes Earnings
Last week, the Nasdaq led the charge with a 1.6% gain, while the S&P 500 rose by 0.7%. The Dow Jones hovered just above flat. Despite continued talk around tariffs and policy risks, stocks have shown surprising resilience.
Now, with 112 S&P 500 companies set to report earnings, investors are gearing up for a week that could reshape the outlook for the rest of the quarter. Results from Tesla, Alphabet, and Chipotle will be especially critical.
Rate Cut Hopes Waver as Fed Signals Mixed Messages
Interest rate expectations remain in flux. Fed Governor Christopher Waller made headlines Thursday with his strongest call yet for a July rate cut. Speaking in New York, Waller argued that inflation is near target and that waiting for the job market to weaken before acting would be a mistake.
However, markets aren’t buying it—at least not fully. A stronger-than-expected June retail sales report, sticky inflation data, and steady jobless claims have cooled expectations. Just a month ago, the chance of a July rate cut stood near 13%. Now, the CME FedWatch Tool shows it at only 5%.
According to Citi chief economist Andrew Hollenhorst, a September cut looks more likely as the labor market shows signs of softening and inflation risks decline.
Strong Earnings, Muted Reactions: A Pattern Emerges
So far, corporate America is delivering. Big banks kicked off the quarter with strong numbers. Then Netflix joined in with an upbeat report Thursday night, even raising its full-year revenue forecast. Yet, the market response was muted. Despite the positive news, Netflix stock fell 5% Friday. Why? Because expectations were already sky-high.
Analyst Ralph Schackart of William Blair summed it up:
“Good results just weren’t enough to exceed lofty expectations.”
FactSet now projects S&P 500 earnings growth at 5.6%, up from 4.8% last week. Still, elevated valuations make it tough for even great earnings to spark further gains. After all, with the S&P trading at 24.7 times trailing earnings, the margin for disappointment is razor-thin.
Tesla and Alphabet: Can They Keep the Rally Going?
This week marks a key test for the so-called Magnificent Seven—the tech titans leading market growth. Tesla and Alphabet are the first of that group to report. Together, these companies are expected to drive 14.1% year-over-year earnings growth in the second quarter. The rest of the S&P 500? Just 3.4%.
Clearly, a lot rides on Big Tech. If Tesla and Alphabet post solid numbers, markets could soar. If not, the rally might stall.
A Broader Market Rally? Not Just Yet
Though Big Tech continues to lead, analysts hope for a broader rally. As Wall Street watches for cyclical sectors to rebound, some strategists warn that the market may be running ahead of fundamentals.
Citi strategist Scott Chronert wrote,
“The issue is the setup. The market is pricing in growth before it happens. We need commentary and proof.”
Analysts want to see growth outside of tech, especially in sectors like manufacturing and services. That shift could indicate a healthier, more sustainable market rally over the next several quarters.
What to Watch This Week
As the Fed enters its blackout period ahead of its July 29–30 policy meeting, economic data will be light. But investor attention will stay sharp. Updates from the services and manufacturing sectors could add clues about the broader economic outlook.
In the meantime, earnings season marches on. If Tesla and Alphabet deliver, they could be the fuel markets need to break new records.
Stay tuned to Maple Wire for your weekly dose of sharp, reliable financial insights.
