NEW YORK, July 26 (Reuters) - Rattled investors are

bracing for earnings from the market's biggest tech companies, a

Federal Reserve policy meeting and closely watched employment

data in a week that could determine the near-term trajectory of

U.S. stocks following a bout of severe turbulence.

A months-long rally in massive tech stocks hit a wall in the

second half of July, culminating in a selloff that saw the S&P

500 and Nasdaq Composite Index notch their biggest one-day

losses since 2022 on Wednesday after disappointing earnings from

Tesla and Google-parent Alphabet.

More volatility could be ahead. Next week's results from

Microsoft ( MSFT ), Apple ( AAPL ), Amazon.com ( AMZN ) and

Facebook-parent Meta Platforms ( META ) could further test

investors' tolerance of potential earnings shortfalls from tech

titans. The blistering rallies in the world's biggest tech

companies this year pushed markets higher, but have sparked

concerns about stretched valuations.

Though the S&P 500 is still only about 5% below its all-time

high and is up nearly 14% this year, some investors worry that

Wall Street may have become too optimistic about earnings

growth, leaving stocks vulnerable if companies are unable to

meet expectations in coming months.

Investors also will be closely watching comments following

the end of the Federal Reserve's monetary policy meeting on

Wednesday for clues on whether officials are set to deliver

interest rate cuts, which market participants widely expect to

begin in September. Employment data at the end of the week,

including the closely watched monthly jobs report, could

indicate if a nascent downshift in the labor market has become

more severe.

"This is a critical time for the markets," said Bryant

VanCronkhite, a senior portfolio manager at Allspring. "You're

having people start to question why they are paying so much for

these AI businesses at the same time the market fears that the

Fed will miss its chance to secure a soft landing, and it's

causing a violent reaction."

Recent weeks have shown signs of a rotation out of the

high-flying tech leaders and into market sectors that have

languished for much of the year, including small caps and value

stocks such as financials.

The Russell 1000 Value index is up more than 3% for the

month-to-date while the Russell 1000 Growth index is down nearly

3%. The small-cap-focused Russell 2000 is up nearly 9% this

month, while the S&P 500 has lost more than 1%.

Even strong earnings may not be enough to get the broad

market out of its recent malaise, at least in the near term,

said Keith Lerner, chief market strategist at Truist.

"The market is going to take direction based on the fact

that these stocks have pulled back," he said. "My thinking is

that tech came down so hard, even if you get a bounce from these

names due to earnings you will have people itching to sell into

any gains."

And any signs that the Fed is seeing worse-than-expected

deterioration of the economy could also unnerve investors,

disrupting the narrative of cooling inflation but

still-resilient growth that has supported markets in recent

months.

"We think they are going to stay with the script that they

will be data dependent but the data has not been going in a

straight line," said Matt Peron, global head of solutions at

Janus Henderson Investors. Conflicting signs in the economy have

included faster-than-expected GDP growth in the second quarter

alongside declining manufacturing activity.

Markets are currently pricing in a near-certainty that

the Fed will begin cutting interest rates at its September

meeting, and expect 66 basis points in total cuts by the end of

the year, according to CME's FedWatch Tool.

The employment data at the end of the week could sway those

odds if it shows that the economy has been slowing faster than

expected, or conversely, if a picture of rebounding growth

emerges.

Still, the recent selloff could be seen as a healthy part of

a bull market that burns off excess froth, said Charles

Lemonides, head of hedge fund ValueWorks LLC.

"I think the longer-term story is that growth names will

carry us through another market high somewhere down the road,"

he said.