US S&P 500 Index

The S&P 500 gained +1.1% last week, although the journey was particularly choppy with news flow thick on the ground. The index tumbled -1.5% on Tuesday after the Fed left rates unchanged but the Fed Chair sounded hawkish, while Brent crude climbed above US$90/bbl. on escalating Middle East tensions, pushing 30-year Treasury yields to their highest levels in almost two decades. A sharp semiconductor selloff added to the pressure as investors questioned the returns from massive AI infrastructure spending, sending the Nasdaq 100 into technical correction territory. Sentiment improved later in the week after Amazon surged +15%, its best day since 2012, on strong cloud growth, while Microsoft also impressed, restoring confidence that AI investment can translate into meaningful earnings growth.

• The S&P 500 feels vulnerable but you cannot argue with the tape, it’s still only 1.7% below its all-time high.

With almost 80% of the S&P 500 having reported earnings company performance remains a key support for the market, with beats comfortably outnumbering misses across most sectors. Healthcare (29 beats, 1 miss), Financials (20-0), Industrials (17-1) and Software & Tech Services (20-3) led the way, while Consumer Discretionary delivered 8 beats versus 2 misses. The reporting season is also reinforcing one important trend, companies demonstrating tangible AI monetisation, such as Amazon and Microsoft, were rewarded, while businesses with heavy AI spending but less visible returns continued to face selling pressure, such at Meta.

• We can see the S&P 500 punching higher towards 8000 into Christmas, but oil prices and inflation remain major hurdles.