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    US Stock Futures Plunge to AI Competition

    January 27, 2025

    Key Points

    • S&P 500 futures declined 2.17%, closing at 5,984.65, with an intraday low of 5,978.65 as concerns over AI competition weigh on sentiment.
    • Trader focus shifts to earnings reports from tech giants, including Apple, Microsoft, Meta, and Tesla, amid market uncertainty.
    • Trump’s tariff announcement on Colombia and the Federal Reserve’s policy stance add to market jitters.

    S&P 500 futures suffered a sharp decline of 2.17%, closing at 5,984.65, reflecting mounting investor concerns over the growing influence of Chinese AI firms. Market anxiety has deepened following news of Chinese startup DeepSeek’s AI Assistant surpassing ChatGPT in popularity on the US Apple App Store, raising fears about the US’s competitive edge in the artificial intelligence sector.

    Adding to the bearish tone, upcoming earnings reports from major technology firms such as Apple, Microsoft, Meta, and Tesla are expected to set the tone for market direction. Traders remain on edge, closely watching for any signs of slowing growth or cautious outlooks that could further pressure equity markets.

    Tariff and Fed Policy Concerns Weigh on Market Sentiment

    Market sentiment has been further dented by President Donald Trump’smove to impose tariffs and sanctions on Colombia, which has raised concerns over potential retaliatory measures and broader implications for trade relations. These developments have fueled volatility, contributing to the ongoing weakness in stock futures.

    On the economic front, the Federal Reserve is expected to keep interest rates steady in its upcoming meeting. However, key economic data releases, including GDP growth and PCE inflation, remain in focus as traders seek clues about the Fed’s future policy direction.

    Technical Analysis

    The futures contract is hovering near key support at 5,980, a critical level that traders are closely watching. A break below this support could open the door to further downside risk, with bearish momentum likely to accelerate. On the upside, resistance remains limited, with sellers likely to emerge near 6,020, followed by stronger resistance at 6,100.

    Technical indicators point to continued bearish pressure. The price is trading below the 5, 10, and 30-period moving averages, reflecting a sustained downward trend. The MACD adds to the bearish outlook, with its strong signals and a histogram suggesting short-term downward pressure. For now, the market remains under the grip of sellers, with key levels acting as pivotal zones for the next directional move.

    With AI competition intensifying and trade policy uncertainties mounting, the near-term outlook for US equities remains bearish. Key events, including corporate earnings and economic data, will likely dictate the market’s next moves.

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