The S&P 500 has pulled back this month after reaching resistance at 7,817 as investors weigh strong earnings, rising crude oil prices and elevated US Treasury yields. The index now stands 2.45% below its all-time high. The index retreated even as major US companies posted strong results.
FactSet data shows that 9% of S&P 500 constituents have reported earnings so far, with average earnings growth of 29%. That rate, if sustained, would mark the third consecutive quarter of earnings growth above 25%. The final growth figure will likely be higher because most technology companies have yet to report. SpaceX, GE Aerospace, Netflix, Meta Platforms and T-Mobile are due to release results in the coming weeks. S&P 500 earnings growth exceeded 50% in the second quarter.
However, the index faces rising oil prices as the crisis in the Middle East escalates. Brent crude has jumped to $110, while West Texas Intermediate crude has crossed $100. Gasoline and diesel prices have continued rising. Those increases mean consumer and producer inflation will remain elevated. Data released this week showed that consumer inflation jumped 3.7% in September, moving further from the Federal Reserve's 2.0% target. Higher inflation may force the Federal Reserve to raise interest rates later this year. US bond yields remain elevated, with the five-year yield hovering at its highest level in nearly two decades.
The index also faces growing fears that the AI bubble may burst soon. Anthropic's valuation has been cut after the company's third-quarter revenue growth fell short of expectations. OpenAI's annualized revenue was about $20 billion lower than expected. Gartner estimated in a report this week that AI infrastructure companies will face substantial impairments over the next few years.
The S&P 500 reached resistance at 7,817, its highest point on August 13 and October 8. The index has formed a double-top pattern with a neckline at 7,512, its lowest level on September 16. That pattern often precedes a bearish reversal. The two lines of the moving average convergence divergence indicator have formed a bearish crossover and point downward. These technical indicators suggest that the index may decline further in the near term. A further decline could take the index to 7,512, followed by the 200-day moving average at 7,312.
S&P 500 Pulls Back Amid Rising Oil Prices and AI Sector Concerns
BenzingaShare
Summary
The fear and greed index has dipped as the S&P 500 pulls back this month, retreating after hitting resistance at 7,817. Rising oil prices and AI sector concerns weigh on sentiment. Brent crude has climbed to $110, while Anthropic and OpenAI underperform. Earnings remain strong at 29% average growth, but altcoins to watch may face pressure if the index drops to 7,512.
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