On Friday, global tech outage caused shockwaves in the market, leading stocks to retreat from their recent record highs. The S&P 500 slid nearly 2%, marking its worst weekly performance since April, while the Nasdaq Composite suffered a significant drop of over 3.5%. Conversely, the Dow Jones Industrial Average managed to rise approximately 0.7%.

Investors will closely observe this week's economic growth and inflation readings, as well as the commencement of Big Tech earnings, to determine if the market's downward trend persists. Additionally, President Joe Biden's announcement on Sunday that he will no longer seek reelection will undoubtedly impact investor sentiment.

This week's economic data releases include the advanced reading of the second quarter economic growth on Thursday, followed by the June reading of the Personal Consumption Expenditures (PCE) index on Friday. The PCE index is a key inflation gauge preferred by the Federal Reserve. Analysts expect a 2.5% increase in "core" PCE from the previous year and a 0.2% rise month-on-month.

A series of corporate quarterly reports is also expected from several S&P 500 companies, including Alphabet, Tesla, and Chipotle. Last week, the market reacted to the news of a slowdown in inflation, leading to increased expectations of a rate cut by the Federal Reserve at its September meeting.

The upcoming data releases will give a clearer picture of economic activity and inflation, which will impact the Fed's decision-making process in its upcoming monetary policy meeting on July 31.

Investors are concerned about the economy's ability to maintain resilience with interest rates at their most restrictive levels in over two decades. Thursday's first reading of the Gross Domestic Product (GDP) for the second quarter is anticipated to show a 1.9% annualized growth rate, higher than the previous quarter's 1.4%.

The stock market is experiencing a shift in focus, with Real Estate and Financials leading sector actions over the past 10 days. Technology and Communication Services, the biggest winners in recent times, have now become the worst-performing sectors. This rotation has also affected market cap, with small-cap stocks in the Russell 2000 outperforming the S&P 500 in recent weeks.

With Big Tech struggling in the market rotation, investors will closely watch the earnings reports of Tesla and Alphabet, both scheduled to announce their results on Tuesday. These reports will offer insight into investor appetite for these popular stocks, which have shown strong performance in recent months despite recent sell-offs.

Analysts are particularly interested in whether the trend of AI-driven growth can continue and whether there is a risk of AI-related trades ultimately unwinding themselves during earnings season. The performance of Big Tech companies is expected to have a significant impact on the overall earnings growth of the S&P 500. FactSet predicts that Alphabet, Nvidia, Meta, and Amazon are set to achieve earnings growth of 56.4% compared to the same period last year.

The broader S&P 500 is projected to have a year-over-year earnings growth of 9.7%, the highest since the fourth quarter of 2021.

Overall, investors are closely monitoring the tech sector's performance, as well as upcoming economic data releases and corporate earnings reports, to assess the future direction of the market and its potential for recovery from the recent downturn.