The S&P 500 appears poised to snap a historic weekly winning streak, with weakness in the artificial intelligence trade resurfacing. Market participants are also anticipating that the upcoming non-farm payrolls report will reinforce the view that interest rates will remain elevated for an extended period.
As of 6:41 a.m. in New York, S&P 500 futures were down 0.4%, with the index itself having been largely flat for the week so far. A decline on Friday would prevent the benchmark from achieving its 10th consecutive weekly gain, which would have been its longest such streak since 1985. Following a rotation out of chip stocks on Thursday, Nasdaq 100 futures fell a further 0.9%, while Dow futures edged up 0.2%.
The market pullback was triggered after Broadcom Inc provided a chip sales outlook that fell short of high market expectations, raising questions about whether the prior surge in AI-related trades had gone too far. Investors are also monitoring potential progress in U.S.-Iran talks, with Brent crude oil declining for a second day to around $94.90 per barrel.
Where to begin
Tomás García-Purriños, a senior asset allocation strategist at Santander Asset Management, commented: "After a period where earnings expectations for the entire sector were consistently revised upwards, investors are now taking a more selective approach to new information and guidance updates. We view the recent weakness primarily as profit-taking and consolidation following a strong rally."
What to watch for
Analysis suggests that the forthcoming employment figures are likely to show a solid increase in non-farm payrolls, indicating that the robust job reports from March and April reflect underlying momentum rather than merely a rebound from prior weakness.
Roberto Scholtes, Chief Strategy Officer at Singular Bank, stated: "Barring a major surprise, the jobs data is unlikely to have a significant impact on the market. Instead, the key variables to watch are the 10-year and 30-year U.S. Treasury yields, which are currently hovering around the 'pain threshold' levels of approximately 4.5% and 5%, respectively."
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