US equity futures are pointing higher in pre-market trading on Monday

(MENAFN- MENAFNEditorial)
US equity futures are pointing higher in pre-market trading on Monday as the market looks to recover some of ’ast week’s losses. Lower oil prices and softer Treasury yields are helping, while another busy week of earnings will play a big part in determining whether buyers can regain control.

For now, though, this is only pre-market price action. How the major indices close today will tell us far more about whether a recovery is starting to take shape this week or wheth’r last week’s weakness still has further to run.

That follows a difficult week for technology. The S&P 500 fell 1.9%, the Nasdaq Composite dropped 4.5% and semiconductors were hit particularly hard.

The bigger picture is that AI demand remains strong. TSMC reported another record quarter last week, showing that the infrastructure build-out is still moving ahead. The concern has shifted towards how that expansion is being financed and what happens when the cost of that financing stays high.

CoreWeave is a good example. The stock fell around 25% last week as yields on its debt moved into distressed territory and the cost of protecting against default rose sharply. That has forced investors to look much more closely at how much debt sits behind the data-centre expansion and whether the returns will justify the borrowing.

That debate has been made harder by inflation. September producer prices rose much faster than expected, while underlying inflation remains elevated. With the Federal Reserve now in its blackout period ahead of the October 2––28 meeting, markets will have to work through this w’ek’s earnings and economic news without fresh guidance from Fed officials.

From a technical perspective, the S&P 500 remains within the broader range between the September low around 7,500 and the recent record high. The index has corrected, but the bigger trend has not broken. Semiconductors remain the weaker area and are likely to stay in focus until price shows that the selling has run its course.

What happened underneath the index last week is arguably more interesting. Around 70% of S&P 500 stocks actually rose, while the equal-weighted index gained for a second consecutive week. Technology fell 6.4%, but consumer staples gained around 5%, healthcare rose 3.4% and the Dow finished the week higher. Capital is moving between sectors rather than simply leaving the market.

That is an important distinction for investors. A weak week for technology does not automatically mean a weak market. It reinforces why we look across all sectors and continue to focus on the strongest stocks in the strongest areas rather than relying too heavily on one theme.

’his week’s earnings will now help determine whether confidence can return to AI and technology. Netflix reports on Tuesday, before Meta, Tesla, IBM, Lam Research and Texas Instruments report on Wednesday. Meta will be particularly important because investors want to see whether the huge sums being spent on AI are continuing to translate into revenue and profit.

Oil remains another risk. Brent has pulled back today, but attacks on commercial shipping around the Strait of Hormuz have increased sharply and Gulf crude flows remain well below normal levels. Any renewed spike in oil would bring inflation and yields straight back into focus.

From a portfolio perspective, we remain selective. We are not chasing a bounce in semiconductors simply because prices are higher today. We want to see support form and the trend improve first.

Our focus remains on the strongest stocks in the strongest sectors. Positions that break major support are removed and capital is redirected towards areas where the trends remain strongest.

Last week was a reminder that a correction in technology does not automatically mean the bull market is over. The money is still there; it is simply moving. Our job is to follow where it goes.

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