Good morning! It’s a huge day in markets. We’re covering Magnificent Seven earnings, the Federal Reserve’s interest rate decision, and more. First time reading? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

The earnings story could look different soon

The rest of the stock market could finally catch up to the Magnificent Seven this year — and it has nothing to do with DeepSeek.

Broadly, the leading batch of tech names — Nvidia, Meta, Amazon, Tesla, Microsoft, Apple, and Alphabet — is expected to contribute significantly in the latest round of earnings. But analysts see their outsized influence on the S&P 500 gradually shrinking in the coming quarters. 

The gap in earnings growth between the Magnificent Seven and the rest of the benchmark index should compress from roughly 8% to less than 5% by the end of 2025, according to FactSet estimates.

That’s a stark contrast to the first three quarters of 2024, when the Magnificent Seven saw year-over-year earnings growth of 33%, while the S&P 493 hit 4.2%.

The Magnificent Seven, as tracked by Roundhill’s MAGS ETF, has tripled the returns of the market-cap weighted S&P 500. 

Indeed, that outperformance becomes even more stark when you compare it to the equal-weighted version of the S&P 500, which gives every stock the same influence on the broader index, as opposed to giving bigger businesses more sway.

And here’s how each member of Magnificent Seven fared over the last three months, including Monday’s DeepSeek sell-off: 

• Tesla, +51.65%

• Amazon, +26.41%

• Alphabet, +17.07%

• Meta, +16.62%

• Microsoft, +4.80%

• Apple, +2.08%

• Nvidia, -8.30%

Microsoft, Meta, and Tesla report earnings on Wednesday, the same day as what’s expected to be a no-move announcement from the Federal Reserve on interest rates.

Then, Apple reports earnings Thursday.

What’s your outlook for the S&P 500 in 2025? Reply directly to this email or let me know on X @philrosenn.

Today’s letter is brought to you by Alpha!

Elsewhere:

📈 Nvidia rebounded. more than 8% Tuesday. The DeepSeek sell-off on Monday partially reversed course, with some investors raising questions about the validity of the Chinese startup’s claims of cheap costs and rapid building. That said, if DeepSeek actually did innovate for pennies on the dollar compared to the US, serious questions around the Magnificent Seven’s spending habits remain. (CNBC)

🏦 The Fed is expected to do nothing today. Policymakers conclude their two-day meeting this afternoon, and markets see little chance of any change to interest rates. Jerome Powell is due to speak after the announcement publishes at 2 p.m. ET, and traders will be monitoring for any new language on inflation, labor markets, and Trump.

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❌ Trump’s immigration crackdown is underway. Deportation flights have started to roll out as the president makes good on his campaign promise. However, Morgan Stanley’s chief economist warned that those deportations, paired with reduced immigration, could set up the US for a “substantial slowdown” in economic growth. (Barron’s)

Rapid-fire:

• President Trump intends to offer buyouts to all federal workers who don’t want to return to office (Axios)

• President Trump order to freeze foreign aid has halted programs worldwide from humanitarian relief to counterterrorism (WSJ)

• Starbucks earnings topped expectations as the new CEO’s “back to Starbucks” plan continues to unfold (Investopedia)

• Trump and his inner circle are sharing mixed signals on tariffs as far as how severe any new policy will actually be (Yahoo Finance)

• A leading Canadian politician said she thinks Trump is threatening allies in an attempt to send a message to China (Bloomberg)

• White House crypto czar David Sacks said DeepSeek trained its AI using content from ChatGPT-creator OpenAI (WSJ)

• The bears are getting loud once again, which is how you know they are wrong (Pomp Letter)

Last thing: