Wall Street's busiest week of the summer sent stocks tumbling as a weak July jobs report surfaced concerns over the health of the US economy and Big Tech earnings failed to ease investor fears.

For the week, the S&P 500 (^GSPC) fell more than 2.5%, while the Nasdaq Composite (^IXIC) fell over 3.7%. This drawdown in the Nasdaq sent the index into a correction after closing more than 10% from its latest high reached on July 10. Meanwhile, the Dow Jones Industrial Average (DJI) also slid about 2.5%.

The week ahead won't provide much new macroeconomic fodder for investors, with updates on activity in the services sector and weekly jobless claims expected to be the main releases in focus.

On the corporate front, earnings from Airbnb (ABNB), SuperMicro Computer (SMCI), Disney (DIS), and Eli Lily (LLY) highlight another busy week of quarterly updates.

A deep cut

After months of seesawing sentiment about when the Federal Reserve will cut interest rates, the market appears to have come to a consensus — the Federal Reserve will cut interest rates next month.

A recent run of softer-than-expected economic data now has investors wondering how large that cut will be.

A slew of weaker-than-expected economic data, highlighted by July's jobs report triggering a closely watched recession indicator, has spurred speculation that the Fed's current policy rate may be far too restrictive.

"Even if the softening in labor market conditions moderates from here going forward, it would seem the Fed is at least 100bp offsides, probably more," JPMorgan chief US economist Michael Feroli wrote in a note to clients on Friday. "So we now think the FOMC cuts by 50bp at both the September and November meetings, followed by 25bp cuts at every meeting thereafter."

During his most recent press conference, Fed Chair Jerome Powell declined to specify when the Fed plans to cut rates but noted that "September is on the table."

This confirmed the market's bias entering the meeting that policy easing would come by the end of the summer. With a September rate cut fully priced in, the new market debate has shifted to how much the Fed will cut and which data points will drive the shift.

Feroli added that, from a risk management perspective, there is a strong case for the Fed to cut before its September meeting.

But, he wrote, "Perhaps Powell doesn’t want to add more noise to what has already been an event-filled summer."

As of Friday afternoon, markets were pricing in a roughly 70% chance the Fed cuts rates by 50 basis points, up from a 12% chance the week prior, per the CME FedWatch Tool.

The shift will likely put upcoming comments from Federal Reserve officials in particular focus. Federal Reserve officials Austan Goolsbee, Mary Daly, and Tom Barkin are slated to make public appearances in the week ahead.

Disney's streaming in the spotlight

Disney will headline the week of quarterly reports when it reports earnings on Wednesday morning.

Focus remains on the state of Bob Iger's turnaround strategy for the entertainment giant as the company doubles down on its commitment to expensive sports rights.

The NBA recently secured a media rights package worth around $77 billion over 11 years with new partners that include tech giant Amazon (AMZN) and Comcast's NBCUniversal (CMCSA), as well as Disney.

"We think investor attention will be on Disney+ and what progress management has made in driving technology, focusing on arresting customer churn, and delighting the user experience," CFRA analyst Ken Leon wrote in a note previewing the release. "A faster track to significant earnings would be a plus for the direct to consumer segment."

Leon added, "Sports rights and the hefty offer to air the NBA should be called out on the earnings call."

Earnings scorecard

While shifts in the macroeconomic narrative took center stage and weighed on markets last week, the S&P 500 as a whole is quietly posting its best quarter of year-over-year earnings growth in nearly three years.

With 75% of the S&P 500 having reported results, the index is pacing for year-over-year earnings growth of 11.5%, per FactSet senior earnings analyst John Butters.

This would mark the highest year-over-year earnings growth rate reported by the index since the fourth quarter of 2021.

Looking ahead, analysts trimmed their third quarter earnings estimates by 1.8% in the first month of the quarter, in line with the average cut seen over the last 20 years.

Weekly calendar

Monday

Economic data: S&P Global US Services PMI, July final (56 expected, 56 previously); S&P Global US Composite PMI, July final (55 prior); ISM Services index (51.3 expected, 48.8 previously)

Earnings: Avis Budget Group (CAR), Clover (CLOV), Hims & Hers Health (HIMS), Lucid (LCID), Palantir (PLTR), Simon Property Group (SPG), Tyson (TSN)

Tuesday

Economic data: Trade balance, June (-$72.6 billion expected, -$75.1 billion previously)

Earnings: Airbnb (ABNB), Amgen (AMGN), Caterpillar (CAT), Celsius Holdings (CELH), Constellation Energy (CEG), Devon Energy (DVN), Reddit (RDDT), Rivian (RIVN), Super Micro Computer (SMCI), Uber (UBER), Wynn Resorts (WYNN)

Wednesday

Economic data: MBA Mortgage Applications, week ending Aug. 2 (-3.9% prior); Consumer Credit, June ($10.30 billion, $11.35 billion previously)

Earnings: CVS Health (CVS), Disney (DIS), Dutch Bros (BROS), Lyft (LYFT), Novo Nordisk (NVO), Occidental Petroleum (OXY), Robinhood (HOOD), Shopify (SHOP), Sony (SONY)

Thursday

Economic data: Initial jobless claims, week ending Aug. 3 (249,000 previously); Continuing claims, week ending July 27 (1.87 million previously); Wholesale inventories month-over-month, June final (+0.2% expected, +0.2% previously)

Earnings: Datadog (DDOG), e.l.f Beauty (ELF), Eli Lily (LLY), Novavax (NVAX), Paramount (PARA), Plug Power (PLUG), SoundHound (SOUN), The Trade Desk (TTD)

Friday

Economic data: No notable economic releases.

Earnings: Canopy Growth (CGC), Nikola (NKLA)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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