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High expectations for U.S. corporate earnings mean the flood of earnings reports due in the next two weeks will play a key role in setting the direction for Wall Street stocks, investors said, after off to a shaky start in 2025.

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

But investors say a strong showing is needed from many household names – worth a combined $25tn – due to report before the end of January, when the market will exceed record high hit last month.

Analysts are predicting the best quarterly results in three years, with S&P 500 companies’ net profit expected to rise 11.4 percent year-on-year, according to FactSet.

The index up 23 percent last year as demand for artificial intelligence-related stocks boosts profits for technology companies. That puts the S&P at a forward price/earnings ratio of 21 times, according to data from LSEG.

“The market cannot count on many extensions to improve returns because of the extent (they) have already been extended to 2024,” said Jurrien Timmer, the global head of macro at Fidelity Investments.

“That puts the burden more on the earnings that are the main contributor to the return of the market,” he added, also pointing to the wrath of higher interest rates.

On average, the negative January for stocks leads to a median return of 2.5 percent for the rest of the year, according to Barclays strategists. An opening month with gains of at least 1.5 percent, however, is likely to result in an annualized return of more than 11 percent.

After eyeing a series of record highs through 2024, stocks have stumbled in recent weeks, battered by worries about the potential for higher interest rates to hurt economic growth. and uncertainty about likely 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, Facebook parent Meta and Tesla are next week.

The highest growth is expected to come from the technology sector, including the so-called Magnificent Sevenbut investors are also looking for signs of improving profits among other sectors in the hope that it will ease the S&P 500’s confidence in some stocks.

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

Market participants will also be watching closely for executives’ thoughts on incoming President Donald Trump’s likely policy agenda, with market gains since his November election victory based in part on in hopes for improved business deregulation and tax cuts.

Concerns about Trump’s actions have the potential to overturn even the strong earnings update, if the president acts early on some of his tariff threats, damaging the outlook for multinationals.

Approximately 30 percent of revenues for S&P 500 companies are generated outside the U.S., with every 10 percent increase in the dollar translating into a 3 percent hit to the company’s average earnings per share. .

“The difference in growth rates between the Magnificent Seven and the rest of the market is key, but I’m more interested in the guidance of companies related to the pro-business narrative since the election,” said Kevin Gordon, senior investment strategist at Charles Schwab.

“We saw a mismatch between the bubble spirits and potentially disappointing numbers last quarter. I wouldn’t hang my hat on the idea that deregulation (under Trump) would be a big growth story,” he added.

Additional reporting by Ray Douglas