The US stock market could see some volatility and could remain under some pressure with attention turning again toward monetary policy. The expectations of higher interest rates as expressed by the Federal Reserve could continue to constitute a source of risks for the market over the medium term.
While the technology sector has been providing strong support to the market with AI boosting investors’ expectations, the US-China tensions could dampen this trend. New restrictions could potentially impact a broad range of technology companies, leaving the market without what was until now a strong positive catalyst. Investors could monitor the release of Micron’s earnings later today as well. The move could also hamper Chinese companies’ ability to develop AI technology.
The US banking sector could also see some volatility this week with investors expecting the Federal Reserve to release its bank stress tests results after market close today. Banks have been seeing increased scrutiny since the collapse of smaller US banks collapsed earlier this year.
Traders could monitor new economic data releases during the remainder of the week. US GDP figures as well as initial jobless claims and pending home sales are expected on Thursday. On Friday, the publication of inflation data could cause some volatility while attention remains on monetary policy and the next steps of the Federal Reserve.
Bas Kooijman, CEO and Asset Manager of DHF Capital S.A. added :
The tensions between the US and China could become an increasingly strong risk factor for the semiconductors and technology-centered industries and the market as a whole by extension. However, chip makers and cloud-computing providers could continue to see strong demand in the US and the rest of the world thanks to the inroads of AI in everyday life.