This week's financial outlook: Fed Minutes lead the way, corporate earnings season continues to heat up

According to the Zhitong Finance APP, the S&P 500 index successfully reached a new historical high due to the latest inflation data signaling a positive possibility of interest rate cuts by the Federal Reserve. As of last week's close, the market continued to perform strongly, with the Nasdaq Composite Index soaring over 2.5%, followed closely by the S&P 500 index, which rose nearly 1.5%, while the Dow Jones Industrial Average saw a moderate increase of about 0.5%. In the new week, investors will closely watch the minutes from the Federal Reserve's January meeting, which will be released on Wednesday at 2 PM (Eastern Time), for more clues on the central bank's outlook on future interest rate trends.

The corporate earnings season is in full swing, with quarterly reports from Alibaba (BABA.US) and Walmart (WMT.US) drawing significant attention. A total of 46 S&P 500 constituent companies are expected to report earnings during this shortened trading week due to the holiday.

In contrast, the release of economic data in the coming week is relatively calm, but the Federal Reserve's January meeting minutes, updates on manufacturing and service activity data, and the consumer confidence index will still be important indicators closely monitored by investors. Notably, Monday is Presidents' Day in the United States, and the U.S. markets will be closed.

Looking back at last week, although two inflation data points for January showed price increases exceeding Wall Street's expectations, economists interpreted the details as positive news for the market and the Federal Reserve. The assessments of the Personal Consumption Expenditures (PCE) index, Consumer Price Index (CPI), and Producer Price Index (PPI) indicated that the pace of price increases may have slowed in January.

Economists expect that the "core" Personal Consumption Expenditures (PCE) for January, excluding volatile categories like food and energy, may reach 2.6%, down from 2.8% in December. This expectation has led the market to anticipate that the Federal Reserve will cut interest rates once or twice in 2025, showing little change from the previous week's expectations. More importantly, many economists believe the Federal Reserve is closer to cutting rates rather than raising them.

Michael Gapin, Chief U.S. Economist at Morgan Stanley, noted in a report: "We believe the threshold for the Federal Reserve to raise rates remains high. The evolution of inflation expectations and the secondary impact of tariffs on service inflation remain key areas of focus. However, for now, we still believe the distribution of outcomes for Federal Reserve policy leans more towards rate cuts than rate hikes."

Additionally, the S&P 500 index's return to historical highs is not solely driven by a few tech stocks. While Meta (META.US) shares have risen for 20 consecutive days, with a year-to-date increase of over 25%, contributing to the rise of the S&P 500 index, Meta and Amazon (AMZN.US) are two of the seven major tech stocks that have outperformed the S&P 500 index so far in 2025.

Meanwhile, the number of companies outperforming the index by 4% at the beginning of 2025 has surged. As of Wednesday's close, 48% of the stocks in the S&P 500 index performed better than the index in 2025, consistent with the 25-year median and up from 29% last year. The past two years have seen the fewest number of stocks outperforming the index in the last 25 years.

Jay Woods, Chief Global Strategist at Freedom Capital Markets, stated that the number of stocks participating in the current rebound indicates strong bull market strength, but it does not necessarily mean that the benchmark index itself will continue to rise He warned: "If Nvidia releases a bad report in a few weeks, we may see the market decline. But we will still see rotation, just not in those stocks that really make the headlines."

The frenzy in the field of artificial intelligence seems to continue to ferment in the market. Although many tech giants have not become market leaders this year, the AI software company Palantir (PLTR.US) is the best-performing company in the S&P 500 index for 2025, with an increase of over 55%, followed by Super Micro Computer (SMCI.US), which also rose over 50%.

On Friday, the positive performance of other AI stocks further highlighted this trend. After Nvidia disclosed its latest holdings, investors quickly adjusted their positions. The AI chip giant sold shares of Serve Robotics (SERV.US) and SoundHound AI (SOUN.US), leading to a sell-off of these two stocks. Meanwhile, the stock price of Chinese autonomous driving company WeRide (WRD.US) nearly doubled.

Here is the important economic data and earnings report schedule for this week:

Monday: Presidents' Day in the United States, market closed.

Tuesday: Economic data includes the February Empire Manufacturing Index (expected -1, previous -12.6) and the February NAHB Housing Market Index (expected 47, previous 47). In terms of earnings reports, Devon Energy (DVN.US), Occidental Petroleum (OXY.US), and Toll Brothers (TOL.US) will announce their results.

Wednesday: Economic data includes MBA mortgage applications for the week ending February 14 (previous 2.3%), January housing starts month-on-month (expected -7%, previous +15.8%), January building permits month-on-month preliminary (expected -2.3%, previous -0.7%), and the Federal Reserve's January meeting minutes. In terms of earnings reports, Carvana (CVNA.US), Cheesecake Factory (CAKE.US), Etsy Inc (ETSY.US), Garmin (GRMN.US), Toast (TOST.US), and Wingstop (WING.US) will announce their results.

Thursday: Economic data includes initial jobless claims for the week ending February 15 (previously 213,000), February Philadelphia Fed Business Outlook (expected 25.4, previous 44.3), and January Leading Index (expected 0%, previous -0.1%). In terms of earnings reports, Alibaba, Walmart, Block (XYZ.US), Booking Holdings (BKNG.US), Rivian (RIVN.US), Shake Shack (SHAK.US), Unity Software (U.US), Texas Roadhouse (TXRH.US), and Dropbox (DBX.US) will announce their results