Following a sharp sell-off in tech stocks last Friday, U.S. stock index futures rose, while European markets showed mixed sentiment on Monday, temporarily halting the previous intense selling pressure on AI-related stocks. Meanwhile, a decline in international oil prices provided support to equities, helping markets achieve a relatively positive start to the new month.
As of press time, the Dow Jones futures rose 0.61%, the S&P 500 futures increased 0.54%, and the Nasdaq futures gained 0.80%.
Global financial markets are entering a pivotal week. Investors are still processing the latest monetary policy decisions from the Federal Reserve and the European Central Bank, while corporate earnings season is in full swing. Additionally, the U.S. midterm elections take place on Tuesday, further increasing market uncertainty.
The MSCI World Stock Index stabilized, while the Euro Stoxx 600 remained largely flat, as declines in energy-related stocks offset gains from consumer stocks. Alstom, a French rail equipment manufacturer, saw its shares plunge 27% after lowering its full-year earnings guidance and announcing a comprehensive restructuring plan.
As the U.S. midterm elections approach, investors remain cautious. Meanwhile, European stock markets face challenges distinct from those in the U.S. market. Sebastian Raedler, Head of European Equity Strategy at Bank of America, wrote in a report: “The Eurozone PMI is expected to decline further, which will weigh on our forecast for the Stoxx Europe 600.”
He added, "However, our primary reason for maintaining caution toward European equities is that the AI capital expenditure cycle may be disappointing. As AI models become increasingly commoditized and corporate competitive advantages prove relatively limited, related investments may fail to meet prior market expectations."
Although the MSCI Asia Pacific Index fell 0.2%, most of its components still posted gains. Meanwhile, Japan’s storage chip manufacturer Kioxia Holdings saw its stock plunge after issuing a cautious earnings outlook, indicating that market concerns about the AI industry’s prospects persist. The South Korean KOSPI Index rose 2.24%, following a 16% cumulative decline in October.
Stephan Kemper of BNP Paribas Wealth Management Germany said: "The mixed earnings reports from Japanese tech companies have left the market highly skeptical. When it comes to AI and the risks of slowing growth, investors still tend to view issues pessimistically, harshly punishing any company that fails to meet nearly perfect expectations."
Simon Wiersma, Chief Investment Strategist at ING, said: “Compared to last Friday’s sell-off, this rebound has been relatively modest, so I’m not yet interpreting it as a compelling ‘buy the dip’ signal. Significant uncertainties around AI investments, interest rates, and geopolitics continue to prompt investors to remain cautious.”
Last Friday’s sell-off indicated that investors are growing increasingly impatient with tech companies whose core businesses are slowing down but continue to ramp up AI spending. The tech giants with the largest AI investments have been taking on significant debt to fund related infrastructure. Alphabet launched its second euro-denominated bond issuance this year on Monday, following its earlier raising of €9 billion (approximately $10 billion) through the euro bond market in May.
Morgan Stanley’s Chief U.S. Equity Strategist, Mike Wilson, believes that the stock market will still experience several risk-clearing events, which may temporarily push markets lower but also create opportunities for investors to increase their equity allocations.
Wilson noted that factors such as the U.S. midterm elections, pressure from AI investments, and liquidity constraints could push the S&P 500 down approximately 9% from its previous all-time high to around 7,100. However, he remains optimistic about the long-term trajectory of the stock market. He expects that once these risk factors gradually subside and the ongoing market adjustments over the past period conclude, the S&P 500 could rise further to 8,000.
Barclays strategists, including Ajay Rajadhyaksha, noted in their report: “In our view, the market performance over the past few weeks does not signal the end of AI-driven trading. We believe this is more akin to a typical market correction, similar to the two previous pullbacks seen earlier in 2026. In both prior corrections, strong corporate earnings ultimately outweighed market concerns.”
Follow the U.S. midterm elections
Investors anticipate that if the Democratic Party achieves a sweeping victory in the U.S. midterm elections, the U.S. stock market may face downward pressure, as markets begin to price in the risks of higher corporate tax rates and stricter AI regulation.
Polls indicate that the Democrats are likely to gain control of the House, but the Senate race remains too close to call. This means that even if the Democrats prevail, they are unlikely to secure the two-thirds majority in both chambers needed to override a presidential veto.
In contrast, Apple has remained a relatively stable haven among tech stocks, as the company has not invested billions of dollars in data center infrastructure like other major tech firms. Apple’s stock has risen for four consecutive months, helping it surpass NVIDIA to become the world’s most valuable publicly traded company.
Goldman Sachs analysts expect hyperscale cloud companies' capital expenditures this year to nearly double to $800 billion, rising further to $1.2 trillion by 2027. Meanwhile, they anticipate the earnings per share growth rate for S&P 500 companies to slow from nearly 30% in 2026 to 18% in 2027.
Goldman Sachs' Chief U.S. Equity Strategist, Ben Snider, wrote in a report: "Corporate earnings results highlight the fundamental challenge currently facing equity investors."
The dollar's safe-haven status is being questioned
Reports that U.S. President Trump seeks to give more time to diplomatic negotiations with Iran eased upward pressure on international oil prices, pushing Brent crude down over 4% to near $108 per barrel.
Meanwhile, long-term U.S. Treasury bonds rose in price ahead of the U.S. midterm elections and a series of employment data releases.
In the foreign exchange market, major currencies experienced limited overall volatility. The U.S. dollar declined 0.2%, while the euro rose 0.37% against the dollar to 1.1199; the USD/JPY remained nearly flat around 157.72.
Meanwhile, investors have also begun to question the dollar’s status as a safe-haven asset, fearing that if tech stocks once again drive market sell-offs, the dollar may no longer benefit from safe-haven inflows as it has in the past, and could instead face downward pressure.
George Saravelos, Head of Global FX Strategy at Deutsche Bank, stated that the U.S. dependence on foreign capital inflows into its stock market has reached an unprecedented level in history. Evidence already shows that when stock market shocks originate primarily within the U.S., the correlation between the dollar and stocks turns positive.
This week's non-farm payrolls are coming.
Among the central banks holding monetary policy meetings this week, markets expect the Reserve Bank of Australia, the Bank of England, and the Sveriges Riksbank to raise rates, while the Norges Bank is expected to hold rates steady.
On the economic data front, key releases this week include the U.S. ISM Manufacturing Survey for October, due later Monday, and the highly anticipated U.S. Non-Farm Payrolls report on Friday.
Gold prices are hovering around $3,900. Independent financial market analyst Nikos Tzabouras said: “Optimism regarding a diplomatic breakthrough between the U.S. and Iran, coupled with renewed concerns about the sustainability of the AI boom, are prompting investors to reassess how much more monetary tightening the Federal Reserve still needs to implement. This has created conditions for a gold rebound, but this rally may prove difficult to sustain.”
Stocks in Focus
Deutsche Bank upgraded cybersecurity firm CrowdStrike from "Hold" to "Buy," driving its stock up 3.4%. Analyst Brad Zelnick stated that the market "has not yet fully recognized how significantly artificial intelligence will expand the cybersecurity market." Peer PANW (Palo Alto Networks) rose 2% amid positive sector sentiment.
Livian, an electric vehicle company, rose 3.8% after UBS upgraded its stock rating. Analyst Joseph Spark stated that the recent stock decline presents a buying opportunity before the production ramp-up of the R2 mid-size SUV reaches a turning point.
The memory chip sector generally rose. After a significant sell-off on Friday, trading capital flowed back into AI-related assets. Micron, SanDisk, and Western Digital each rose approximately 2%.
Estée Lauder, a beauty company, reported its first-quarter fiscal results, surpassing analyst expectations and causing its stock to rise 3.5%. The company posted adjusted earnings per share of $0.72 and revenue of $3.72 billion. According to FactSet, analysts had expected earnings per share of $0.51 and revenue of $3.65 billion. The company also raised its full-year profit guidance.
Marvell Technology's stock rose slightly by 3%; Rambus increased 2% before halting trading. Marvell has reached an agreement to acquire Rambus, a deal that bets on the AI data center sector and values Rambus. The transaction is expected to close in the first half of 2028, and the combined company will become the industry leader in AI connectivity.
At the beginning of this week, oil prices declined, putting pressure on the energy sector. ExxonMobil fell 1.2%, Chevron dropped nearly 1%, and Valero Energy retreated 1.5%.
Following Friday's pullback, investors bought the dip, causing slight rebounds in Bloom Energy and Vertiv. Bloom Energy, which dropped 8% on the previous trading day, rose 2.3% today; digital infrastructure company Vertiv, which fell 5% on Friday, gained 2.5%.