The S&P 500 Is Near J.P. Morgan’s Bearish Target. Tech Stocks Are the Risk.

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Tech megacaps could correct and drag down the whole market, analysts warn.

The largest technology stocks have been a key force buoying the S&P 500 this year, helped by the investor frenzy over artificial intelligence. But tech giants could actually be the next risk for the stock market, according to J.P. Morgan.

“While some indexes have already hit our 4Q bearish objectives, we don’t see enough evidence to fade weakness,” J.P. Morgan analysts Jason Hunter and Marko Kolanovic wrote in a Tuesday note. “Mega cap threatening key pattern support still poses a material risk.” The S&P 500, for its part, has covered much of the distance between its summer peak at 4,607 points and J.P. Morgan’s base-case target zone around 4,100—the index closed at 4,247 on Tuesday. But that doesn’t mean a rebound is coming.

“We would rather wait to see if mega cap indexes break nearby support and see what type of selling pressure creates before entertaining a tactical long trade strategy,” they added.

 

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