Stocks slip despite EU trade deal — plus, the 2 questions we want tech earnings to answer

The market remains muted Monday, anticipating a high-impact week featuring earnings from a third of the S&P 500, including major AI hyperscalers like Meta, Microsoft, and Amazon, where investors will scrutinize capital expenditure outlooks and revenue growth against elevated spending, following Alphabet's recent capex increase. This week also brings a Federal Reserve policy announcement and the July nonfarm payrolls report. Separately, a new US-EU trade agreement indicates tariffs will persist but with reduced escalation risk, potentially expanding market access for US exporters.

Analysis

The market is exhibiting a cautious posture, with the S&P 500 trading near record highs but showing muted activity ahead of a catalyst-heavy week. This period of calm belies significant event risk, including earnings from approximately one-third of the S&P 500, a Federal Reserve policy announcement, and the July nonfarm payrolls report. The primary focus is on the AI hyperscalers—Meta, Microsoft, and Amazon—whose upcoming earnings will be scrutinized for two key metrics: whether revenue growth is sufficient to justify elevated spending levels, and if full-year capital expenditure guidance will be increased. This follows a significant precedent set by Alphabet, which raised its 2025 capex forecast by $10 billion to $85 billion, signaling robust long-term demand for AI infrastructure. On the macroeconomic front, a new US-EU trade agreement provides a degree of stability; while tariffs are expected to remain in the 15% to 20% range, the deal reduces the risk of sudden escalations, a net positive for supply chain predictability and market access for U.S. exporters.

Key Decisions for Investors

• Investors should closely monitor the full-year capital expenditure guidance from Meta, Microsoft, and Amazon, as Alphabet's recent $10 billion capex increase has set a high benchmark for AI investment expectations.
• Given the convergence of major earnings reports, a Federal Reserve decision, and the nonfarm payrolls data, expect heightened market volatility and consider using this period to assess portfolio risk rather than initiating large new positions.
• The US-EU trade agreement, which stabilizes tariff policy and reduces escalation risk, warrants a re-evaluation of companies with significant European export exposure or complex global supply chains, as they may benefit from increased predictability.