S&P500 and Nasdaq Index: US Stocks Brace for Major Tech Catalysts to Shape the Week Ahead

Stocks Stabilize Tuesday After Ferocious Monday Selloff

Stocks stabilized on Tuesday morning after a ferocious selloff that saw significant declines on all three major indexes directly tied to increasing worries regarding the impact of AI on jobs, worsening trade tensions, and growing geopolitical instability.

Ahead of the cash market opening on Tuesday, Dow futures rose 58 points (or 0.12%), while S&P 500 futures gained 0.17% and Nasdaq 100 futures climbed 0.27%, representing small bounce-backs from the sharp declines experienced the previous day.

IBM Collapse Drags Dow Down 822 Points as Software Leads the Decline

The Dow Jones Industrial Average dropped nearly 822 points (nearly 1.7%) on Monday, thanks in part to the almost 13% decline in IBM shares. The S&P 500 fell by approximately 1%, falling below the zero mark for 2023 as the Nasdaq Composite Index dropped by 1.1%.

The software industry was responsible for the largest losses on these indexes, with Microsoft and CrowdStrike reporting amongst the largest declines. Cybersecurity companies and banks experienced substantial reductions in their valuations due to continuing decreases in investor desire to take risks in the stock market.

No Bullish Breakout Without a Tech Recovery

The present state of the market, as characterized by Warren Pies, co-founder and strategist at 3Fourteen Research, reflects a loss of momentum present in the current trading environment. Trading in the present range has been defined by an increasingly poor changeover of trades.

Consumer staples and energy have had a good quarter, with each of these sectors gaining high double-digit returns of more than 10%. Tech and financials, on the other hand, have fallen short of good performance and therefore Pies feels that this combination will not lead to a very bullish breakout opportunity.

Earlier this month, Pies downgraded U.S. equities to neutral based on this trading environment assessment. The only realistic way for the market to break out would require a recovery led by the technology sector. “There is no way to break this with continued weakness in tech and financials.”

Anthropic Event Adds More Uncertainty to a Pressured Market

Traders are paying close attention to Anthropic’s upcoming large product event on Tuesday. The anticipation for new product announcements and feature demonstrations helped to influence software sector weakness on Monday as market participants were assessing the potential for further disruption in the enterprise technology space. This event adds additional uncertainty to a market that has already been under pressure at this time.

Nvidia and Salesforce Earnings Could Be the Market’s Next Big Catalyst

There are two major catalysts coming up today. One is the consumer confidence report, and the other is earnings from Home Depot. Looking beyond Tuesday, the larger movers in the markets will be companies like Nvidia and Salesforce as well as Snowflake with their upcoming earnings reports.

Given the current tech pullback this year, the earnings for each of these tech companies will carry a lot of weight, and as such, their performance will impact whether there is a more substantial recovery in tech stocks.

According to Pies, there are reasons to believe that the tech sector will rebound due to fundamental strength found in strong productivity. However, Pies believes that the selloff we have all seen has been “the healthiest of all three” and because of that traders should wait until we see a definite break in the current range before taking on risk. The near-term trend is one of caution with the market ranging, and therefore tech must again gain leadership for tech to turn bullish.

More Information in our Economic Calendar.