By Martin Baccardax
The S&P 500 has fallen into a worrying pattern over the past four months. The index barely has recorded an overall gain despite a blowout earnings season, slowing inflation pressures, and a rate cut from the Federal Reserve that might define its direction over the first half of the year.
The broadest benchmark of U.S. blue chip shares first tested 7000 in October 2025 but retreated suddenly in the wake of big capital spending plans from Meta Platforms that spooked investors over the broader artificial-intelligence-investment trade.
Since then, subsequent attempts to take and hold 7000 have been thwarted by some form or another of AI angst, geopolitical risk, or trade and tariff uncertainty. This week's retreat, which clipped more than a full percent from the S&P 500, happened to include elements of all three that likely will remain uppermost in investors' minds over the coming weeks.
The meltdown in software stocks, which has lopped more than 25% from the iShares Expanded Tech-Software ETF, stoked concerns about credit quality in a host of alternative finance stocks and shuttered redemptions at a key fund run by Blue Owl Capital, won't be placated by stronger earnings reports.
The existential risks from AI advancements that are hammering the sector have come to the fore weeks after the companies reporting this week, including Salesforce and Workday, closed the books on their fourth-quarter activity.
And new products, plug-ins, and updates are being released virtually every day in a market that is nervous enough to slash $22 billion from International Business Machines' market value in a single session -- or take seriously the views of a think-piece written from the perspective of an investor living in the future.
"These fears are on both ends of the spectrum, with worries about too much AI hype and excess valuations, and fears that AI will eliminate or curtail industries like cybersecurity or software," said David Laut, chief investment officer at Kerux Financial in Granite Bay, Calif. "We won't have all of the answers this week, but worried investors are hungry for clarity in these industries."
The uncertainty tied to President Donald Trump's tariffs also is here to stay it would seem, given his desire to both tinker with the current rate of levies and explore various "national security" options to add even more to imports of things such as chemicals, telecom gear, and electrical grid equipment.
"The tariff story cannot be seen in isolation from ongoing AI jitters, as these add to fragile risk sentiment," said ING's Michiel Tukker. "Investors are increasingly selective about the impact of AI on various business models, and we are unlikely to see the end of this anytime soon."
The U.S. military buildup in the Persian Gulf, as well as the president's threat of air strikes should Tehran refuse to reach an agreement on curbing its nuclear program, also likely will linger over oil and energy markets well into the spring.
Nvidia's fourth-quarter earnings report on Wednesday could be a catalyst for stocks to escape their current pattern of advance and retreat but investors are increasingly seeing its revenue, earnings, and outlook within the prism of a narrow cohort of megacap tech stocks that aren't dictating overall market performance.
An index of the so-called Magnificent Seven has declined 6.5% for the year, with Nvidia's 1.4% gain making it the only member trading in positive territory.
Those stocks, however, are still the market's biggest in terms of influence, and Nvidia's 7% weight on the S&P 500 is more than enough to dictate direction over the coming weeks.
"Given that the current market environment has shifted from celebrating the AI theme to auditing it, Nvidia will likely play out as the most influential report for broader markets this entire earnings season," said Anthony Saglimbene, chief market strategist at Ameriprise.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 24, 2026 08:18 ET (13:18 GMT)
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