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Investors say high expectations for US corporate profits mean that the torrent of earnings reports due over the next two weeks will play a particularly important role in determining the direction of Wall Street stocks, after a shaky start to 2025.

The S&P 500 had its best week since the US election in November last week, buoyed by strong numbers from the largest banks, pushing the index back into the black for January.

But investors say a strong showing is needed from several household names — worth a combined $25 trillion — due to report before the end of January if the market is to surpass last month’s record high.

Analysts expect the best quarterly results in three years, with net profits for companies listed on the Standard & Poor’s 500 index expected to rise by 11.4 percent year-on-year, according to FactSet.

Index It rose 23 percent last year The demand for artificial intelligence-related stocks has boosted the gains of technology companies. This has put the S&P 500 at a forward price-earnings ratio of 21 times, according to data from LSEG.

“The market cannot rely on multiple expansions to boost returns due to its size [they] “It actually expanded in 2024,” said Jurian Timmer, global head of macro at Fidelity Investments.

“This places a greater burden on profits to be the main contributor to market returns,” he added, also pointing to tensions over rising interest rates.

On average, negative stock performance in January leads to an average return of 2.5 per cent for the rest of the year, according to strategists at Barclays. However, an opening month that yields gains of at least 1.5 percent tends to result in annualized returns of more than 11 percent.

After hitting a series of record highs in 2024, stocks have stumbled in recent weeks, weighed down by concerns about the potential for higher interest rates to hurt economic growth and uncertainty about possible early action by the incoming Trump administration.

Companies including Netflix, GE and consumer products group Procter & Gamble are among those scheduled to report this week. Tech giants including Amazon, Microsoft and Facebook’s parent company Meta and Tesla are set to launch the following week.

The highest growth is still expected to come from the technology sector, including The so-called Great SevenBut investors are also looking for signs of improving profitability among other sectors in hopes that will ease the S&P 500’s reliance on a few stocks.

Profits of the Big Seven companies — Apple, Microsoft, Alphabet, Amazon, Tesla, Meta and Nvidia — are expected to rise 21 percent this year, slowing from a 33 percent rate in 2024, according to FactSet. Dividend growth for the other 493 stocks in the index is expected to rise to 13 percent, from 4 percent.

Market participants will also be closely watching executives’ thoughts on the potential policy agenda of incoming President Donald Trump, with market gains since his election win in November based in part on hopes for a business boost and tax cuts.

Concerns about Trump’s actions also have the potential to take the luster off even strong earnings updates, if the president acts early on some of his tariff threats, which could hurt the outlook for multinational companies.

Nearly 30 percent of the revenues of S&P 500 companies are generated outside the United States, with every 10 percent rise in the dollar translating into a 3 percent decline in the company’s average earnings per share.

“The spread in growth rates between the Big 7 and the rest of the market is key, but I’m much more interested in corporate guidance in terms of the pro-business narrative since the election,” said Kevin Gordon, chief investment strategist at the bank. Charles Schwab.

“We can see a mismatch between frothy animal spirits and the disappointing numbers last quarter. I wouldn’t hang my hat on the idea of ​​deregulation.” [under Trump] “It will be a huge growth story,” he added.

Additional reporting by Ray Douglas