Heavy earnings week, jobs data to test US stocks after Microsoft swoon

Published Sun, Feb 1, 2026 · 10:31 PM

[NEW YORK] Another huge batch of corporate earnings including from megacaps Alphabet and Amazon will test the US stock market in the coming week after a disappointing report from heavyweight Microsoft weighed on equity indexes.

Wall Street also will focus on the monthly US jobs report due on Feb 6. Last week, the Federal Reserve pointed to signs of stabilisation in the labour market as the US central bank paused its interest rate cutting cycle.

With the stock market entering the fourth year of a bull market, investors have been wary of rising valuations, particularly for high-flying names benefiting from optimism over profits driven by artificial intelligence (AI).

Microsoft, which has spent massively on infrastructure to support AI applications, saw its shares battered on Thursday (Jan 29) after its cloud business failed to impress, while software shares were broadly punished amid further disappointment elsewhere in the industry.

“For those companies where expectations have become very, very lofty, the onus is going to be on them to deliver,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors. “Even if they show growth, if it is growth that is not up to the expectations of the market, there is a risk there that their stock price could be punished.”

Despite declining at the end of the week, the benchmark S&P 500 remained up over 1 per cent for the year and not far from record-high levels. The index earlier in the week broke above the 7,000 level for the first time, before pulling back.

Investors in the coming days will continue to digest a series of developments on Friday, including US President Donald Trump’s nomination of former Fed governor Kevin Warsh to be the central bank’s next chair.

Stunning declines in prices of gold and silver on Friday, following huge climbs for the precious metals, also kept markets on edge.

Big earnings week

About one quarter of the S&P 500 is set to report quarterly results in the coming week, with strong expected US profit growth a key source of optimism underpinning bullish outlooks for equities in 2026.

Of 166 S&P 500 companies that reported results as at Friday, 76.5 per cent posted earnings above analysts’ expectations, nearly in line with the 78 per cent rate over the prior four quarters, said LSEG IBES. Fourth-quarter earnings are expected to have climbed 10.9 per cent from a year earlier.

In contrast to Microsoft, Meta Platforms – another megacap company and major AI spender – posted strong sales in its quarterly report that boosted its shares on Thursday.

Investors will now focus on results and capital spending plans from Google parent Alphabet and Amazon, two other AI-focused “hyperscalers”.

“Although investor reaction to earnings announcements from a couple of the hyperscalers was mixed, it did confirm that capex spending on building out AI infrastructure will not see any let-up,” said Sid Vaidya, chief investment strategist at TD Wealth.

Other companies set to report in the coming week include weight-loss drugmaker Eli Lilly, chipmaker Advanced Micro Devices and media giant Walt Disney.

S&P 500 companies overall are expected to increase earnings by 15 per cent in 2026, putting their financial outlooks under the microscope.

“The stock market is largely reflecting the positive fundamentals that are driving that, and earnings growth is the biggest component of that,” Vaidya said.

A stable jobs market?

The coming week’s jobs report will also give Wall Street a critical look at the economy’s health. The nonfarm payrolls report for January is expected to show growth of 64,000, indicated a Reuters poll.

Data flow is normalising following the lag effects from the 43-day government shutdown late last year that delayed key economic reports. The monthly consumer price index, closely watched for inflation trends, is due the following week.

“We haven’t really gotten a lot of clean looks at the state of the labour market and inflation because of that government shutdown last year, so we think those are going to probably be more important than usual,” said Michael Reynolds, vice-president of investment strategy at Glenmede.

Following Wednesday’s Fed meeting, markets are now pricing in the central bank to hold off on further rate cuts until its June meeting, although any surprise weakening in the labour market could sway those expectations.

“The broad sense is that the economy is on a decent growth trajectory here… and I would expect that that alone should help to provide a little bit of a floor under payrolls,” Baird said. REUTERS