The Dow Jones and Nasdaq 100 have been under intense selling pressure in recent sessions, as persistent concerns over the artificial intelligence (AI) sector weigh on investor sentiment. The tech-heavy Nasdaq 100 Index (NDX) fell to 28,840, its lowest level since September 16, and now sits roughly 8% below its 2025 peak. The Dow Jones Industrial Average has also retreated, dropping to 52,220, a modest decline from its year-to-date high of 54,757.
Earnings season takes center stage
The primary catalyst for stock markets this week will be the latest earnings season, with hundreds of U.S. companies set to report quarterly results. The most closely watched will be the so-called Magnificent Seven—Amazon, Microsoft, Google, and Apple among them—which collectively hold a market capitalization exceeding $15.2 trillion. Their reports will offer crucial clues on whether corporate spending on AI infrastructure will continue at the current pace.
Beyond the mega-cap tech names, other significant earnings reports due this week include GE Vernova, KLA Corporation, SK Hynix, ServiceNow, Eli Lilly, Mastercard, and Intel. These results will provide a broader view of corporate health across technology, healthcare, and financial sectors.
Federal Reserve decision and economic data
Another major event for U.S. equities is the Federal Reserve's interest rate decision on Wednesday. Economists widely expect the central bank to hold rates steady in the 3.75%–4.00% range. Recent comments from Fed officials, including Kevin Warsh, suggest the Fed will not deliver a second consecutive rate hike at this meeting. The labor market has shown signs of softening, with the economy adding just 29,000 jobs last month, far below the expected 90,000.
However, inflation remains stubbornly above the Fed's 2% target, with both headline and core CPI having exceeded that level for the past five years. Alongside the Fed's decision, markets will also digest key macro data, including personal consumption expenditure (PCE), GDP, and consumer confidence figures.
Oil prices surge on geopolitical tensions
The Dow and Nasdaq 100 will also be influenced by the ongoing surge in crude oil prices. Brent crude is trading at $117 per barrel, while West Texas Intermediate (WTI) has climbed to $103, as investors anticipate further U.S. strikes against Iran. Reports suggest that the administration is planning major attacks after the midterm elections, while Iran has warned of potential retaliation against desalination plants, data centers, airports, and energy infrastructure.
With the midterm elections now over, there is growing concern that the U.S. may escalate military action to force Iran to capitulate. Such a move would likely push oil prices even higher, adding to inflationary pressures and potentially weighing on equity valuations.
AI sector jitters persist
The stock market has been under pressure recently due to ongoing jitters in the AI industry. Prominent analysts such as Ken Griffin and Ray Dalio have voiced warnings about the sector, while Gartner has flagged a growing divergence between AI spending and actual revenue generation. Gartner predicts that billions of dollars in impairments will be announced in the coming years. These concerns have dragged down most AI-related stocks, impacting the broader market and leading to higher dividend yields on some of these names.
Investors will be watching for any new developments on the AI front, as well as how companies address these concerns during their earnings calls.
This article is for informational purposes only and does not constitute financial advice.
