By Lewis Krauskopf
NEW YORK, July 31 (Reuters) - U.S. employment data and a batch of corporate results this coming week will keep equity investors on edge over the direction of the stock market, which has been buffeted by geopolitical tensions, uncertain interest-rate policy and sizable moves in heavyweight technology shares.
The S&P 500 was on track for a slim weekly gain as of Thursday, after some big daily swings, and was roughly 2.3% below the benchmark index's June 2 record high.
Investors were
digesting contrasting earnings reactions from Microsoft and Meta Platforms - two megacap companies whose massive AI spending has been at the heart of the bullish AI trade this year. Microsoft shares posted their biggest single-day percentage jump since 2008 after its upbeat forecast on cloud growth, while Meta's tumbled after it reported a plunge in cash flow.
The Federal Reserve's monetary policy meeting and resulting "hawkish hold" on Wednesday also left investors unclear about the implications for stocks amid what many said were mixed messages over the central bank's plan for reining in inflation.
The monthly U.S. jobs report, due on August 7, will command Wall Street's attention along with results from companies including drugmaker Eli Lilly and semiconductor designer Advanced Micro Devices.
The first quarterly report is also due on Tuesday for Elon Musk's SpaceX, whose shares have stumbled after their post-initial public offering surge last month and which could have broader ramifications for investors' risk appetite.
"It's an overall market that is searching to regain its footing and kind of feeling around for where that is going to come from," said Yung-Yu Ma, chief investment strategist at PNC Financial Services Group.
The S&P 500 is up over 8% in 2026. Investors have pointed to fundamental support for stocks from strong overall corporate profit growth, while a recent broadening of equity gains to lagging sectors could indicate more durability for the nearly 4-year-old bull market.
But concerns that some areas of the AI trade have become overheated have weighed on indexes, especially on high-flying shares of semiconductor companies that have retreated in July. A re-escalation in the U.S. war with Iran is also complicating the picture, with a resurgence in oil prices driving up Treasury yields on renewed inflation worries.
"The market has kind of been held hostage to the price of oil and the yield on the 10-year (Treasury), both of which have moved higher," said Art Hogan, chief market strategist at B. Riley Wealth. "We'll see if we can get any relief on that front next week."
PAYROLLS REPORT EYED AFTER FED FALLOUT
Wall Street was still grappling with the Fed's decision to keep interest rates unchanged, as three of its 12 policymakers dissented from the vote in favor of a hike.
Confusion centered on the press conference from new Fed Chair Kevin Warsh, who was presiding over his second meeting. Warsh repeated his firm intent to bring inflation down to 2%, but investors expressed uncertainty about how he planned to reach that longstanding target.
Data on Thursday showed the core Personal Consumption Expenditures Price Index — an inflation gauge the Fed tracks — rising 3.3% year on year in June.
Warsh's aim to reduce the Fed's guidance telegraphing its rate plans could also bring new market scrutiny to economic data, including the upcoming jobs report.
The new leadership at the Fed is "a meaningful change in terms of mindset around forward guidance, transparency and communication," said Jim Baird, chief investment officer with Plante Moran Financial Advisors.
"What we'll likely see as a result is the potential for maybe a little bit more volatility around key economic releases ... because there's just a little less clarity around where we're heading."
BIG EARNINGS WEEK INCLUDES PALANTIR, CATERPILLAR
The nonfarm payrolls report for July is expected to show an increase of 91,000 jobs, and an unemployment rate of 4.3%, according to a Reuters poll.
Given the Fed's focus on inflation, a significantly higher job growth number could raise concerns about an overheated economy and firm up bets on rate hikes. Fed funds futures as of Thursday were indicating a 64% chance of a rate increase at the Fed's next meeting in September, according to LSEG data.
"If there was an unexpected heating up of labor conditions, that would contribute almost unambiguously to a Fed more likely to raise at the next meeting," Baird said.
More than one-quarter of the S&P 500 is due to post results next week. Reports include Caterpillar, Palantir and Merck.
Second-quarter profits overall are tracking for a big jump. Including companies that have reported along with estimates for the rest, S&P 500 earnings are on pace to rise 27.7% on an adjusted basis from a year ago, according to LSEG IBES data as of Wednesday.
"The earnings picture overall should provide stability," PNC's Ma said.
(Reporting by Lewis Krauskopf; Editing by Michelle Price and Rod Nickel)
