It’s the most important 48 hours of the first quarter with big earnings, the Fed and trade talks

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The next 48 hours could not be more crucial to the financial markets.

Earnings results entering peak season, a Federal Reserve decision on interest rates, and the beginning of China trade talks — investors have a lot to digest from a slew of market-moving events on Wednesday and Thursday.

“It’s a pretty quiet morning as markets enter the most important 48 hours of CQ1,” said J.P. Morgan’s Adam Crisafulli in a morning note to clients on Wednesday. He added Fed and trade talks “are likely to be positive for risk assets.”

So far so good with Dow jumping more than 250 points at the open of trading on Wednesday.

Peak earnings

Earnings are in full swing and have entered among the busiest two days of the schedule. In terms of sheer size and influence of the companies reporting, these next two days are the most important.

Dow component Boeing on Wednesday reported year-end resultsthat smashed Wall Street’s expectations after tech giant Applereleased numbers that beat estimates on Tuesday after the bell. Both stocks surged at the open Wednesday.

All eyes will be on FacebookMicrosoft and Tesla on Wednesday as they all report earnings after the bell. The next big companies to go are General Electric and Amazon whose results are due on Thursday.

The Fed

The Fed is scheduled to release its latest policy statement at 2 p.m. ET, with investors widely expecting it to leave its benchmark overnight lending rate unchanged but possibly acknowledge its intention to remain patient on further rate hikes this year. Fed Chairman Jerome Powell is due to hold a press conference shortly after the statement’s release at 2:30 p.m.

There are three things that Fed watchers want to hear from the chief — flexibility on the balance sheet policy, “patience and flexibility” and attention to data and the markets.

Powell had already said the balance sheet would be “substantially smaller” than it is now, but he had another run in with markets when he said in early October that the Fed was far from a neutral rate. Fed officials including New York Fed President John Williams have recently stressed that they are watching economic reports and will go slow when it comes to raising rates.

Trade talks

The United States and China finally commenced their trade war negotiations on Wednesday, trying to work up a long-term deal before the tariff cease-fire expires Mar. 2.

Chinese representatives are due to meet with a group of White House officials Wednesday and Thursday for the talks. U.S. Trade Representative Robert Lighthizer will lead the discussions.

Optimism towards a resolution is growing as Treasury Secretary Steven Mnuchin said Tuesday the U.S. expects to make “significant progress” in trade talks this week. Top White House economic advisor Larry Kudlow also said President Donald Trump is “moderately optimistic” about reaching a deal.

Even Apple CEO Tim Cook is seeing “more optimism in the air in January” about the trade tensions.

The month ends on Thursday and so far the S&P 500 is up 5 percent and counting in January. Barring any big missteps by the Fed or a big miss by Amazon, the next 48 hours could set a positive tone for the full year.

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