The S&P 500’s recent drop signals a potential shift, with key earnings results expected to influence any recovery.
European and Asian shares fell sharply following Wall Street's decline on Wednesday. US index futures also point to a weaker open on Wall Street. And while we have seen evidence of rotation in other sectors like energy and financials in the previous week, this wasn’t strong enough to prevent the wider market from going down along with the tech sector – not when the first of the"Magnificent 7" companies reporting results that failed to meet expectations.
While that could change in the long run, as growth stocks are by definition valued so highly because of future profits anyway, in the short term the mismatch in actual results from expectations is starting to worry some investors. It will be interesting to see how other companies in the Magnificent 7 group will perform when they release their results, with most coming in next week.
However, if the selling continues, then the next potential support area to watch is the area marking the highs made in April and May between 5333 to 5368. Below that area, there’s not much support seen until long-term support and the 200-day average near the 5,000 mark.