This week is going to be huge for the stock market

• This week will be a big one for the stock market as investors confront a wave of data.

• The two biggest companies in the world, Microsoft and Apple, will report earnings results.

• Investors also have to navigate a Federal Reserve interest rate decision and the January jobs report.

It’s about to be a huge week for the stock market as investors confront a wave of economic data and decide whether the ongoing rally to record highs has staying power or not.

The S&P 500 is coming off two weeks that saw record highs in the benchmark index, buoyed by earnings optimism and data showing that the US economy is growing at a healthy clip even as inflation continues to show signs of cooling.

This week, though, could make or break the rally of the last two weeks, with three big events looming for investors.

Mega-cap earnings frenzy

The frenzy kicks off on Tuesday with the earnings results from mega-cap tech companies Microsoft and Alphabet. Investors will be keenly focused on commentary related to artificial intelligence, of which both companies are at the forefront of, and how it will impact their business in 2024 and beyond.

Earnings guidance will be key because profit expectations among analysts are on the high end this year after low single-digit profit growth in 2023.

“Markets are walking a fine line between expecting lower interest rates and higher corporate earnings,” DataTrek co-founder Nicholas Colas said in a recent note to clients. “US equity valuations offer little room for error.”

According to data from FactSet, Wall Street expects 2024 S&P 500 earnings growth of 12.2%, which has accelerated in recent months and is well above the 10-year average of 8.4%. Any disappointment in earnings guidance could send the stock market reeling as analysts adjust their profit estimates lower.

Enter the Fed

Fast forward to 2 pm this Wednesday and investors will be squarely focused on the Federal Reserve’s latest interest rate decision and a follow-up speech from Fed…