S&P 500 Forecast: SPX rebounds as chip selloff pauses, Middle East uncertainty persists

US futures        

Dow futures -0.25%, S&P futures 0.25%  & Nasdaq futures 0.7%

European futures

FTSE -0.5%,  DAX -0.1%

• US stocks recover from losses last week
• Chip stocks pause sell-off ahead of tech earnings
• US economic calendar is quiet this week
• Oil falls after rising 15% last week

U.S. Stocks Open Higher as Chip Sell-Off Pauses

U.S. stocks have opened higher on Monday, rebounding after last week's losses as the heavyweight chip sector pauses its recent sell-off and investors weigh the latest developments in the Middle East.

After weakness in tech last week, the major AI names are mostly higher today as markets continue to assess whether AI hyperscalers could slow spending on AI infrastructure in the coming quarters. That spending has been a key driver of guidance upgrades across the semiconductor sector, so any signs of moderation are being watched closely.

Attention now turns to tech earnings this week, with results from Alphabet, Tesla and Intel in focus.

Meanwhile, Treasury yields are holding steady, while oil prices are pulling back following the latest developments in the Middle East.

Although oil surged 15% last week, it is trading around 3% lower today after reports that Iran could be open to talks with the U.S., raising hopes that a diplomatic route remains possible.

Even so, higher oil prices last week have brought inflation concerns back into focus. The market is now pricing an 83% probability of a Fed rate hike by the end of the year, up from 72% a week ago.

While this week is relatively quiet for U.S. economic data, next week's FOMC meeting will be key in setting the tone for markets through the rest of the summer.

Corporate Movers

SpaceX is rising over 1% after announcing that its next Starship launch attempt has been pushed back to Thursday following last week's aborted launch.

Alibaba is up 3% after unveiling its new AI model, Qwen 3.8 Max. The company claims the model ranks second only to Anthropic's Fable V.

Domino's is up 7% despite reporting a Q2 earnings miss. Revenue came in slightly ahead of expectations, while stronger order growth across both delivery and takeaway helped reassure investors.

Semiconductor stocks are recovering after last week's heavy selling. AMD is up 3.5%, Micron Technology is rising 4%, while Intel is up 2.5% ahead of earnings later this week.

S&P 500 Forecast – Technical Analysis

The S&P 500 continues to trade above its rising trendline and the 50 EMA. The index recently ran into resistance around 7,575 before pulling back to test the rising trendline, where buyers have stepped back in. However, momentum is beginning to fade.

Should the trendline and the 50 EMA continue to hold, buyers will look to retest 7,575, the July high. A move above here brings 7,620 and fresh record highs into focus.

A break below the rising trendline and the 50 EMA opens the door to 7,340 support. Below there, attention turns to 7,225, the June low.

FX Markets – Dollar Steady

The U.S. dollar is little changed after modest losses last week. Traders remain cautious as they assess whether diplomacy between the U.S. and Iran is still possible, keeping positioning fairly light.

EUR/USD is easing back towards 1.1450 as investors await further clarity on the Middle East and Thursday's ECB meeting.

The ECB is expected to leave rates unchanged at 2.25%, although markets will be watching closely for any signals from Christine Lagarde over the possibility of a September rate hike.

GBP/USD is trading around 1.3450 as Andy Burnham replaces Keir Starmer as UK Prime Minister.

Investors will be looking for confirmation that Shabana Mahmood will be appointed Chancellor. She is viewed as fiscally disciplined, which would reassure markets that Burnham is unlikely to pursue the more expansionary spending plans that some had feared.

Oil Falls as Diplomacy Hopes Offset Supply Concerns

After initially rising around 3% this morning, oil prices have reversed course and are now trading around 3% lower, with volatility continuing to be driven by headlines out of the Middle East.

The latest exchange of strikes between the U.S. and Iran, together with continued disruption to shipping through the Strait of Hormuz, initially pushed prices sharply higher.

However, reports that Iran remains open to negotiations have revived hopes of a diplomatic solution, helping oil prices give back their earlier gains.

The price action underlines just how sensitive the oil market remains to headlines surrounding both supply through the Strait of Hormuz and the prospects for de-escalation.