Big Tech Earnings and Fed on Deck

MACRO FRAME

September’s CPI and PPI data continue to fuel expectations of a new hiking cycle from the Fed, while higher interest rates are adding to stress in credit markets.

STOCK INDEX FUTURES

Equity index futures are higher as a drop in oil prices offered immediate relief ahead of a busy week of tech earnings and a Fed decision. Meta announced that it plans to raise up to $95 billion in equity, brining AI financing and the eventual returns of AI infrastructure spending back into focus for big tech. The company launched approximately $35 billion of common-stock and convertible-preferred offerings and plans a separate program of up to $60 billion after its non-voting Class C shares begin trading, expected in early 2027. The planned capital raising comes after Meta reported its first negative quarterly free cash flow in more than a decade, despite revenue growth exceeding expectations. Strong AI-related demand and revenue growth are no longer sufficient on their own to reassure investors about the scale of investment required. Pressure is more acute among smaller cloud-infrastructure providers. CoreWeave, Nebius and IREN are lower in premarket trading after Elon Musk warned of consolidation and failures across the sector. Each has lost more than 30% this month, while selected CoreWeave and Nebius bonds have reached record lows in the supplied reporting.

Alphabet and Microsoft report Wednesday, followed by Amazon Thursday. With roughly one-third of the S&P 500 reporting this week and aggregate third-quarter earnings growth tracking above 32% per LSEG estimates, the broader profit backdrop remains strong. The test is whether cash generation and credible returns on spending can restore confidence—or whether rising capital requirements continue to outweigh earnings strength.

CURRENCIES

US DOLLAR: The USD index is little changed at 101.87. The dollar is broadly steady ahead of five central bank decisions this week, though the Fed is expected to hold rates steady. Instead, focus will center around the composition of the votes on the FOMC for signals on how far the Fed could raise rates. There have been several officials who have suggested that their preferred path in policy would be patience at the October meeting, so a consensus 12-0 to hold should not be taken as a reluctance to hike again in the coming meetings. Big tech earnings will also play a large role in dollar direction this week. Renewed weakness in AI-related assets could undermine confidence in US growth and encourage a less aggressive policy outlook. Strong earnings and persistent inflation, by contrast, would reinforce expectations that rates remain higher for longer.

EURO: The euro fell 0.12% to $1.1189. Moody’s decision to leave France’s rating unchanged has provided some relief after last week’s sharp sovereign-bond selloff. The French–German 10-year spread narrowed to approximately 160 bps from 176 bps last week, which has alleviated some pressure on the pair alongside the overnight drop in oil prices. However, French fiscal difficulties and political uncertainty look set to persist ahead of next spring’s presidential election. Thursday’s ECB meeting will therefore be watched not only for rate guidance but also for any discussion of market fragmentation and the conditions attached to potential backstops, though the situation likely does not warrant any intervention from the ECB. Money markets continue to expect no policy action this week, though are pricing a 71% chance of a hike in December and see 67 bps of tightening over the next 12 months.

Watch point: French sovereign stress will continue to be a dominant factor in price direction, however, the $1.10 level acts as a strong resistance level.

BRITISH POUND: Sterling fell 0.15% against the dollar to $1.3350; EUR/GBP is near 0.8398. Investors are trimming exposure to the pound ahead of Wednesday’s budget announcement. Market expectations have in recent shifted toward fiscal restraint, restored headroom and less long-dated gilt issuance, an outcome that could support bonds and the currency but leaves room for disappointment if the announcement falls short and if the budget fails to address sources of fiscal strain. Money markets continue to expect a move higher from the Bank of England at the next meeting in November. The pricing, in part reflects hot inflation and wages data last week, though while the reports make the case for a November move the reality of an aggressive sequence thereafter appears unlikely.

JAPANESE YEN: The yen fell 0.34% to 157.38 yen per dollar. The Bank of Japan is expected to hold rates steady this week, which should leave focus on its guidance on subsequent tightening. Strategists cited by Reuters found no evidence that Japanese institutions were bringing overseas funds home, yet. September core inflation above the BOJ’s 2% target supports the case for further normalization, while the majority of Reuters-polled economists expect a quarter-point increase in December.

Watch point: While markets are underwhelmed at the BOJ, a path for additional rate hikes looks to be  appears to be the primary scenario.

AUSTRALIAN DOLLAR: The Aussie is down 0.18% to $0.7020. As of recent, the Aussie has found some support from hawkish comments from RBA officials, which has lifted market pricing of a potential rate hike before year-end, despite recent labor data showing that the unemployment rate hit a five-year high at 4.7%. Quarterly inflation data on Wednesday will serve an outsized role in monetary policy expectations. Forecasts expect the trimmed mean measure of inflation to rise 1%, and annual rate to remain at 3.6%. RBA Governor Bullock and other officials will appear before lawmakers on Wednesday.

Watch point: August’s hiring figures argue for a higher-for-longer stance, leading the focus to Q3’s inflation data.

TREASURY FUTURES

Yields saw a flattening move to start the week. The market does not and has not expected policy action from the Fed at this week’s meeting for some time. PCE data for September will follow the meeting on Thursday and could test the Fed’s message, with forecasts expecting third-quarter GDP growth of approximately 3.2% and headline PCE inflation accelerating to 3.6% year over year from 3.4%. A firm combination would reinforce the case for additional tightening, while softer results would support patience. Today’s $69 billion two-year auction is the first major supply test of the week, followed by five-year notes Tuesday and seven-year notes Thursday. Demand at the front end will help assess how comfortable investors are with current policy pricing after last week’s rally.

Watch point: Inflation risk, fiscal and corporate supply, capital competition and term premium will be key factors in determining whether the yield curve maintains its recent flattening or falls into a bear steeping move.

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