Fed, Microsoft and Alphabet All Land Wednesday: What Investors Should Watch

Wednesday is the busiest day on the calendar this month. The Federal Reserve announces its rate decision at 2:00 p.m. ET, and Microsoft (MSFT) and Alphabet (GOOGL) report after the close, about two hours later.

The setup is jumpy. Friday's session was rough: the S&P 500 fell 0.5% to 7,623.68 and the Dow dropped 652.82 points to 52,215.16, with Brent crude above $116, its highest since June 2022, Mint reported.

Here's the macro backdrop in one line: oil is high, inflation is hot, and the Fed has already started raising rates again.

The Fed is widely expected to hold at 3.75%-4.00% after September's quarter-point hike. CME FedWatch put the odds of no change near 90%, per Stocktwits' weekly preview on Yahoo Finance, and futures put a hike this week below 10%.

Jobless claims offer a counterweight. They fell to 194,000 last week, near a 57-year low, so the labor market hasn't cracked the way some bears expected. That's one reason the Fed can keep talking tough.

So the rate itself is not the story. The wording is. As Regards of Wallstreet's week-ahead points out, traders put roughly 70% to 80% odds on a hike in December, so they'll parse the statement for any change in that path.

There's no new dot plot at this meeting, either. With no Summary of Economic Projections, Chair Kevin Warsh's 2:30 p.m. press conference carries extra weight, because it's the only place to hear how officials are weighing oil-driven inflation against a softer job market.

Then come the earnings. After the 2:00 p.m. announcement, Alphabet reports with a 4:30 p.m. call, and Microsoft follows with a call at 5:30 p.m., according to TradingKey's calendar.

Wall Street expects Microsoft to report EPS of $4.72 on $90.75 billion in revenue, while Alphabet is expected to post EPS of $3 on $127.83 billion.

Those estimates come from Fiscal.ai data cited by Stocktwits. The headline numbers matter less than what's inside them: Azure growth, Google Cloud, and above all capital spending, since both companies are pouring money into AI data centers.

That's where the market's nerves are. Last Thursday, Meta's negative free cash flow dragged the Nasdaq down 2.6%, 24/7 Wall St. noted, and revived fears about how AI spending is financed.

For Alphabet, watch Search and the commentary on AI Overviews and AI Mode, plus YouTube ads and cloud margins. For Microsoft, the question is whether new AI capacity is easing supply constraints and lifting cloud revenue growth, not just raising costs.

Thursday adds more. Third-quarter GDP and September PCE arrive at 8:30 a.m. ET. The Dow Jones estimate cited by Stocktwits calls for headline PCE up 0.5% on the month and 3.7% on the year, with core at 3.1%. Anything hotter would strengthen the December-hike case.

The risk is a pile-up. A hawkish Fed, a capex scare and a hot PCE print in 24 hours could hit high-valuation tech hard, with the 10-year Treasury yield already around 5.00%. Stocktwits retail sentiment on the S&P 500 ETF was reading "extremely bearish."

That can cut both ways. Sentiment that gloomy often means bad news is partly priced in. A steady Fed and clean cloud numbers could spark a sharp relief rally.

What to do with that? Don't build positions around a single binary result. Decide your levels before Wednesday's close, size trades so a gap in either direction won't force you out, and keep some cash ready if the reaction overshoots.

Bottom line: the Fed sets the tone at 2:00 p.m., big tech sets the verdict by evening, and Thursday's inflation data gets the last word.