Wall Street Week Ahead: Key Events That Could Trigger a Market Turnaround
Following reports from Google and Tesla that dampened sentiment due to massive AI capital expenditures, the market now faces the Federal Reserve's interest rate decision and earnings from Microsoft, Meta, and Apple, alongside two major Israeli firms.
The coming week is likely the busiest and most significant of the second-quarter earnings season, beginning against the backdrop of a troubling lesson from last week: the US capital market is no longer willing to tolerate unlimited spending on artificial intelligence.
This week, two forces that can move any investor's portfolio will converge: the Federal Reserve's interest rate decision on Wednesday and a series of reports from tech giants Microsoft, Meta, and Apple.
Google (Alphabet) published an impressive report, with revenue of 119.8 billion dollars, a 24% jump, and 82% growth in the cloud segment. Yet the stock fell about 6% in two days. The reason: the company raised its capital expenditure forecast for 2026 to a record 195-205 billion dollars, while free cash flow is already negative (minus 5.9 billion dollars for the quarter) for the first time in its history as a public company.
"We are still in a supply-constrained environment," explained CFO Anat Ashkenazi, but investors focused primarily on the numbers.
Tesla took an even harder hit, falling about 14.5% in one day, as it missed profit forecasts, saw eroding vehicle profit margins, and faced rising expenses related to Robotaxi and Optimus. The only positive point was Intel, which beat forecasts by a wide margin (profit double the expectation) and jumped about 12% after the report, but sentiment later reversed, and it closed with a decline of about 8%.
On Wednesday, the Federal Reserve will publish its interest rate decision, perhaps the most unusual event of the week. The interest rate currently stands at 3.50%-3.75%, and the market is currently pricing in a 66% chance of leaving the rate unchanged versus about 34% for a hike.
The reason is inflation that refuses to cool down (around 3.7%) and oil prices that crossed the 100-dollar-per-barrel threshold against the backdrop of the war with Iran. "A rate hike in July is still very unlikely," estimates Gregory Daco, chief economist at EY-Parthenon, but he also notes that September could be the real test.
On Wednesday after the close, Microsoft (expected revenue of about 87.7 billion dollars) and Meta (about 60.3 billion dollars) will report. After what happened to Google, the central question is identical: are the huge expenses on AI infrastructure starting to justify themselves, or will investors punish every additional dollar spent?
Both companies are huge "hyperscalers," and any hint of a reduction or acceleration in spending could move the entire chip sector — and with it the S&P 500 index, which is at the core of pension savings in Israel.
On Thursday, Apple will report, the stock that led the "Magnificent Seven" this year with a jump of about 20%. This will be a special report: according to reports, this will be Tim Cook's last conference call as CEO before John Ternus replaces him. Analysts expect revenue of about 109 billion dollars. Unlike the other giants, Apple is perceived as less exposed to the AI investment bubble, which has made it a relative safe haven.
The week is also notable for two Israeli companies. Teva will report on Wednesday before the opening (expected revenue of about 4 billion dollars), with the focus on continued debt reduction and the growth of innovative drugs. Check Point will report on Thursday (expected revenue of about 670 million dollars), against the backdrop of continued demand for cyber products.
