S&P 500 Forecast: SPX set for a weekly decline led lower by tech as AI worries linger

US futures        

Dow futures 0.44%, S&P 500 futures -0.07%  & Nasdaq futures  -1%

European futures

FTSE 0.24%,  DAX  1.27%

• US stocks opened mixed, with tech leading the selloff
• The market lowers October Fed rate hike expectations after Fed Warsh’s comments
• CoreWaeve falls further as AI financing worries linger
• Oil rises across the week as Middle East supply concerns remain

U.S. stocks open higher as AI financing concerns persist

U.S. stocks have opened mixed as investors continue to worry about the financing behind the AI trade while also looking ahead to more earnings next week.

The sell-off in tech stocks, and more specifically semiconductors, this week has left the S&P 500 and Nasdaq on track to end the week lower, while the Dow Jones is set to rise around 1%.

Overnight, Fed Chair Kevin Warsh did little to change market expectations that the central bank will leave interest rates unchanged at this month's meeting. Warsh steered clear of comments on monetary policy but did reiterate that the Fed would deliver price stability.

Following his comments, markets scaled back expectations for an October rate hike, bringing them down from around 30% to below 15%. This helped lift stocks while pulling the U.S. dollar lower.

However, tech stocks remain under pressure, with CoreWeave at the heart of the sell-off. The cloud computing provider’s shares sank 20% from Monday to Wednesday, as concerns over its debt burden intensified. While comments from Nvidia CEO Jensen Huang helped ease concerns on Thursday, the market remains worried about the amount being spent on building data centres funded by debt.

While demand for chips and computing capacity remains strong, investors are increasingly questioning the vast sums being spent on data centres and AI infrastructure. These concerns are now spilling into credit markets, as investors reassess the risks associated with the borrowing needed to finance the AI boom.

At the same time, elevated interest rate expectations weigh on the present value of future cash flows, hitting AI valuations and, more broadly, tech stocks. Rising yields also increase financing costs, creating a double hit for companies that rely heavily on borrowing to fund their expansion.

Looking ahead, the U.S. economic calendar is quiet today. Attention will turn to next week’s earnings, with Meta, Tesla and Netflix reporting.

Corporate movers

Tesla is rising after the EV maker unveiled its second-generation Roadster, featuring rocket-style thrusters developed with SpaceX. The demonstration showcased the car’s unusual aerial capabilities, with production expected to begin in 2028. The unveiling has helped lift sentiment around Tesla’s technology ambitions.

SpaceX has also received a boost following the Roadster unveiling, with reports highlighting the technology developed in collaboration with Tesla.

CoreWeave shares are falling around 4% as Thursday’s rebound proves short-lived. The stock remains under pressure amid concerns about the company’s debt burden and the cost of financing its data centre expansion

S&P 500 forecast – technical analysis

The S&P 500 is once again attempting to break out of the symmetrical triangle pattern. Having found support at the 50 EMA, the price is testing falling trendline resistance around 7,750. A rise above this level would bring 7,840 and fresh record highs back into focus.

On the downside, sellers will need to break below the 50 EMA at 7,685, followed by rising trendline support at 7,650 and horizontal support at 7,620, the June high. A break below this area would open the door to 7,500, the September low.

FX markets – dollar falls across the week

The U.S. dollar is falling on Friday to a two-week low and is on track for its first weekly decline in three weeks, following three consecutive weeks of gains.

The dollar has come under pressure, tracking Treasury yields lower as concerns over AI spending in a high-interest-rate environment weigh on investor sentiment. This has prompted a rotation into safe-haven Treasuries, putting downward pressure on yields and the U.S. dollar.

EUR/USD is rising and is on track for its first weekly gain in over a month. However, the recovery from below 1.1200 has run into resistance around 1.1240 following the release of eurozone inflation data. Eurozone CPI jumped to 3.8% year on year in September, up from 3.2% in August, boosted by higher oil prices. Core inflation also rose to 2.5% from 2.4% the previous month.

GBP/USD is rising against a weaker U.S. dollar, reaching a three-month high and putting the pair on track to snap a four-week losing run. Data this week highlighted the resilience of the UK economy, giving the Bank of England more room to raise rates without putting additional pressure on an already weak economy.

The data has also offered some relief to Chancellor Healey ahead of his budget later this month, as he remains committed to reducing the budget deficit.

Oil rises across the week on Middle East supply worries

Oil prices are holding steady on Friday but remain on track to gain across the week amid uncertainty over Middle East supplies and following a larger-than-expected draw from U.S. crude stockpiles.

WTI is set to rise around 6% across the week as markets continue to weigh the persistence of supply disruptions in the Middle East. Attacks on shipping around the Strait of Hormuz continue to underpin prices.

Attacks on vessels around the Strait of Hormuz have intensified over the past 10 days, with Iran saying it is increasing strikes in response to the U.S. blockade of its ports.

Meanwhile, Washington is considering lifting sanctions on so-called shadow fleet vessels and petroleum products from countries such as Russia and Venezuela in a bid to ease pressure on global oil supplies and freight costs.