SPX500 falls ahead of key AI earnings on tech sell-off and hawkish Fed
SPX500 analysis
Last week's hawkish Fed signals continue to reverberate across Wall Street. The central bank removed its easing bias and updated projections suggest one hike this year, while new Chair Warsh committed to restoring price stability. Markets now price in a rate hike as early as September, and higher-for-longer expectations are weighing on the S&P 500.
Meanwhile, tech is under pressure this week and the drop in Asian markets, led by South Korea's Kospi, is spilling over into US sentiment. At the same time, Elon Musk's SpaceX has dropped for three straight days, erasing the market euphoria that followed its blockbuster IPO.
SPX500 drops today as it faces near-term challenges and moves below the EMA200. This shifts the immediate bias to the downside, leaving it vulnerable to deeper declines. However, the RSI points to oversold conditions, which could facilitate a rebound. The path of least resistance remains toward new record highs, both technically and fundamentally.
Geopolitical uncertainty will not go away easily, but the diplomatic breakthrough removes the risk of immediate escalation, and as Hormuz traffic picks up, oil prices are pushed lower. Inflation fears are easing as crude prices drop, with markets awaiting fresh updates this week. Any signs of containment could reduce pressure on the Fed for further tightening.
Crucially, the AI boom continues unabated, providing a structural tailwind for SPX500 and Wall Street despite periodic episodes of scepticism. Hyperscalers are accelerating investment in the infrastructure buildout, boosting semiconductor demand.
Investors now await Wednesday's earnings from Micron, which emerges as bellwether for the AI trade. The AI boom is fuelling unprecedented demand for memory and Micron's products, driving record business growth and making the stock one of the top SPX500 performers this year. Revenues and profitability are expected to keep rising, but increasing capex, high expectations and a lofty valuation mean even a stellar report may not satisfy markets.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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