Fed Uncertainty Weighs on Markets as Corporate Earnings Provide Support

Investors are bracing for uncertainty from the US Federal Reserve's next policy move as they head into this week. The Fed's stance on interest rates, inflation, and geopolitical tensions is top of mind, particularly with the Jackson Hole economic symposium from August 27 to 29 looming.

The market has been focused on real Treasury yields, which reflect bond returns after adjusting for inflation and are an important driver of asset valuations. Higher real yields can put pressure on technology stocks and other long-duration assets by raising financing costs and reducing the relative appeal of future earnings.

Corporate earnings have helped limit market volatility, with around 85% of S&P 500 companies that have reported results exceeding earnings expectations. Profits have risen 32.7%, excluding mark-to-market gains at Alphabet and Amazon, according to LSEG data. Upcoming results from Walmart and chipmaker Analog Devices are expected to provide further insight into consumer demand and the broader health of the US economy.

AI-related infrastructure spending has been a strong theme during the current earnings season and is expected to remain a major focus for investors in the weeks ahead. Hyperscaler capital spending plans are among the most closely watched developments as investors assess which companies are likely to benefit most from the artificial intelligence boom.