Wall Street continues to climb a wall of worry even as investors deliberate how much longer equities can maintain their record run. The stock rally continued on Friday , with the major averages each advancing more than 1% for the week, buoyed by strong results from Meta and Amazon, as well as a slate of recent reports pointing to a healthy and growing U.S. economy . But questions remain for investors after some major disappointments in an intense week suggested more challenges ahead. Stocks tumbled Wednesday after Federal Reserve Chair Jerome Powell said a March rate cut is unlikely ; the S & P 500 posted its worst day since September following the statement. Apple dropped more than 3% this week after reporting lackluster earnings, weighing on the Dow Jones Industrial Average. Elsewhere in corporate earnings, regional banks as represented by the SPDR S & P Regional Banking ETF slid 7% this week after poor results from New York Community Bank spurred investor fears of a wider contagion. NYCB shares tumbled 42% for the week. “The pain trade is now lower, not higher from here,” Scott Rubner, managing director at Goldman Sachs, wrote in a Thursday note. “We have all-time high problems for the US equity market and the bar is simply too high in February.” “‘If we go down a little, we could go down a lot’ – I like adding February equity hedges and will fade this green pre-market bounce,” Rubner added. Signs of market weakness For investors, there may be more issues in the market going forward in 2024. While investors came into the year anticipating a broadening of the rally, small caps have thus far underperformed to start the year. The Russell 2000 is down by more than 3% in 2024, while the S & P 500 is higher by more than 3%. Small-caps are likely to suffer further going forward from the impact of higher for longer interest rates. Liz Ann Sonders, chief investment strategist at Charles Schwab, told CNBC’s “Money Movers” on Friday that zombie companies, to which the Russell 2000 has a higher exposure, are more likely to crumble now that the prospect of lower rates have moved out to the latter part of the year. “We can’t look at sort of the market in a monolithic way anymore,” Sonders said. “I think expectations around Fed policy moves in yields seem to be having, probably rightly so, a disproportionate impact down the cap spectrum.” There are also troubles in the regional banking sector after NYCB, which took over the failed Signature Bank last year during the regional banking crisis, reported a fourth-quarter loss that shocked investors. “I still think that this commercial real estate problem is very much in through the windshield, not the rearview mirror, but there’s different maturity schedules, there’s different exposures within commercial real estate,” Sonders said.” “It’s more of a slow motion train wreck or a simmering crisis over time, as opposed to sort of a Lehman-esque problem where there’s going to be some announcement and the bottom falls out.” For stock pickers looking for opportunities in the wreckages, she advised going through the sector with a fine-toothed comb. There’s a growing disparity in mega-caps as well. On Friday, Raymond James called “MnM? Microsoft, Nvidia & *now* Meta Leading in AI Era,” the hottest new portfolio of mega-cap tech stocks, replacing the “Magnificent Seven” that dominated markets so completely last year. Analyst Josh Beck turned especially bullish on Meta Platforms after the social media company’s strong quarterly results, as well as its first ever dividend payment. However, other mega-cap companies such as Apple have taken a backseat, with the iPhone maker reporting a 13% drop in sales in China. Some investors also continue to worry about a recession on the horizon even if weakness is not surfacing immediately in the economic data. James McCann, deputy chief economist at asset manager Abrdn, said he expects the long and variable lags of interest rate hikes will make themselves felt in the broader economy eventually, and he expects a hard landing in the second half of the year. “If we’re right that a recession, that a mild recession is coming, then I think there’s a decent chance that equities would struggle in that environment,” McCann said. Stronger economic data Regardless, however, Rhys WIlliams, portfolio manager at Wayve Capital Management, said he expects markets can still continue churning higher, so long as some mega-cap companies continue to outperform. On Friday, for example, the sharp gains in Amazon and Meta helped outweigh any muted losses in Apple, as well as even any declines in their respective sectors. “As long as these major companies that are both large and defensive, to some extent, stay positive, the whole market can stay positive. You don’t really need to broaden out for the whole market to do OK as defined by the index,” Williams said. “However, it’s not going to be the runaway market that November and December was.” More broadly speaking, Art Hogan, chief market strategist at B. Riley Financial, expects that stronger economic data will continue to be a positive for stocks, with first-quarter GDP tracking at a 4.2% increase, up from 3% previously, according to the Atlanta Fed’s GDPNow tracker. He also said rate cuts will boost equities, even if expectations for the first one are moved out past March. “We no longer live in the fear that any economic data is going to show up that is so strong that it forces the Fed to raise rates again. They’re at the high point of the tightening cycle,” Hogan said. “So, while we can quibble over the ‘when,’ we know ‘what’ they’re going to do next, and that is a tailwind. That is a headwind from ’23 turned into a tailwind in 2024.” Week ahead calendar: Monday, Feb. 5 9:45 a.m. PMI Composite 9:45 a.m. Markit PMI Services 10 a.m. ISM Services PMI Earnings: Simon Property Group , Estee Lauder Companies , Tyson Foods , On Semiconductor , McDonald’s , Caterpillar Tuesday, Feb. 6 Earnings: Prudential Financial , Chipotle Mexican Grill , Fortinet , Ford Motor , Enphase Energy , Eli Lilly , GE Healthcare Technologies Wednesday, Feb. 7 8:30 a.m. Trade Balance 3 p.m. Consumer Credit Earnings: The Walt Disney Co ., Wynn Resorts , PayPal , Yum! Brands , CVS Health , Hilton Worldwide , Uber Technologies, Costco Wholesale Thursday, Feb. 8 8:30 a.m. Continuing Jobless Claims 8:30 a.m. Initial Claims 10 a.m. Wholesale Inventories Earnings: Motorola Solutions , Expedia Group , Ralph Lauren , T. Rowe Price Group , ConocoPhillips , The Hershey Co. , Philip Morris International, Tapestry Friday, Feb. 9 Earnings: PepsiCo