Can the AI stock rebound reverse the U.S. stock market's decline? The S&P 500's correction risk has not yet been lifted, and the 200-day moving average has become a key support level.

The S&P 500 index seems unable to hold its highs. Since hitting a record high in October, every pullback has produced a lower low, and every rebound high has also been lower than the previous one. As U.S. inflation pressures re-emerge, the Federal Reserve's monetary policy outlook becomes more uncertain, and investors begin to reassess the massive capital expenditures and investment returns in the artificial intelligence (AI) sector, the pressure on U.S. stocks is extending from a valuation adjustment in tech stocks to broader market risk. Technical analysis shows that this U.S. benchmark index is now approaching a key support zone, and if important technical levels are breached, further downside room may open up. However, U.S. stocks showed a clear rebound before Wednesday's market open, with tech stocks as the main driver. AI cloud service provider CoreWeave reported stronger-than-expected third-quarter results and raised its full-year revenue outlook, expecting to achieve adjusted profitability in the first half of 2028. Its shares surged more than 16% premarket, easing market concerns about returns on AI infrastructure investment and financing risks. Meanwhile, Nvidia rebounded about 5% premarket, and chip stocks such as Micron and Marvell Technology rose in tandem. In addition, news that Anthropic plans to list, with a valuation of up to US$1.4 trillion, also provided some support to the AI sector. Nevertheless, this rebound has not yet eliminated the macroeconomic pressure brought by above-expected inflation and rising expectations of Fed rate hikes. S&P 500 approaches 200-day moving average; a break below 7,331 points may bring a deeper correction Technical analysts study past price action to judge where the market may go next. When a stock or index is in a downtrend like the S&P 500, chartists look for so-called support levels, which are levels that can provide a floor for prices. Conversely, in a rising market, they look for resistance levels. Resistance levels are the opposite of support levels and act as a price "ceiling." Support and resistance levels can appear in many forms. Moving averages are one common reference, smoothing price action by removing extreme prices over a specific period. Because moving averages update continuously, they also fluctuate up and down with market changes. Support and resistance levels can also be determined based on previous highs and lows, as well as so-called Fibonacci retracement levels. Fibonacci retracements are a series of price levels calculated based on percentages, to which the market often returns after a swing. Trendlinesdiagonal lines connecting key highs or lowscan also play a role. In addition, important round-number levels can also serve as support or resistance, often referred to as psychological levels. Last week's decline in the S&P 500 brought it close to its 200-day moving average, an important technical indicator closely watched by many in the market. For the S&P 500, this level is even more significant because the index has not closed below its 200-day moving average since April 8. In addition, because the average still includes gains from the S&P 500's rebound from its lows earlier this year, it remains in an uptrend. Worrying signals on the charts also include the S&P 500's persistent pattern of lower highs and lower lows since its October peak. If the S&P 500 breaks below its 200-day moving average, currently at 7,331 points, market focus will shift to a support zone roughly between 7,237 and 7,313 points. That zone brings together the June and July lows, a trendline starting from April 2025, and the 38.2% Fibonacci retracement of the March-to-October 2026 rally. If 7,237 points is breached, downside pressure could intensify further, with the next important support zone between 7,080 and 6,900 points. That zone includes the 50% and 61.8% Fibonacci retracements of the March-to-October 2026 rally, the 7,002.29-point high set in January, and the psychological 7,000-point level. However, if the S&P 500 can rebound and break above Monday's high near 7,578 points, the next resistance will come from the 100-day and 50-day moving averages, at about 7,620 and 7,673 points, respectively. If the index further breaks above the 7,715.57-point high set on November 4, it would break the pattern of lower highs since the October peak and refocus the market on the index's intraday record high of 7,844.62 points. Inflation pressures pick up again, adding uncertainty to the Fed's policy outlook Recent U.S. inflation data came in above market expectations, further increasing the macroeconomic pressure on U.S. stocks. Data released by the U.S. Labor Department on November 10 showed that the October consumer price index (CPI) rose 0.4% month on month, above economists' expectation of 0.3%; core CPI, excluding food and energy prices, rose 0.3% month on month, also above the market expectation of 0.2%. The above-expected inflation data led the market to reassess the Fed's rate path. As a result, expectations for a Fed rate hike in December rose markedly, with interest rate futures at one point reflecting a 100% probability of a hike next month, with most bets pointing to a 25-basis-point increase and some possibility of a 50-basis-point hike. U.S. Treasury yields rose accordingly, especially the two-year Treasury yield, which is more sensitive to Fed policy expectations. This means investors' earlier hopes that monetary policy might shift toward easing are facing challenges. If inflation remains above the Fed's 2% target, policymakers may need to keep rates higher or even tighten policy further. For highly valued tech stocks, rising rates not only raise corporate financing costs but also increase the discount rate applied to future cash flows, thereby pressuring equity valuations. If inflation and rate expectations continue to deteriorate, even if corporate earnings perform reasonably, the stock market may struggle to gain sustained upward momentum. AI trade cools, tech selloff intensifies downward pressure on the index Meanwhile, the recent selloff in the U.S. tech sector also reflects changing investor attitudes toward the AI investment boom. Over the past few years, optimistic expectations for AI computing demand, chip sales, and data center construction have driven sharp gains in shares of large tech companies and semiconductor firms. But as hyperscale cloud service providers continue to increase capital expenditures, investors are paying more attention to whether these massive investments can sufficient commercial revenue, profit, and free cash flow. Since October, tech and AI-related stocks have continued to weaken. On November 5, semiconductor stocks suffered a sharp selloff, with the Philadelphia Semiconductor Index falling about 11% at one point intraday and the Nasdaq Composite falling as much as 5% intraday. Chip, memory, server, and other AI infrastructure-related companies were all hit. The market worries that the funding required for data center construction continues to expand, while whether the commercialization progress and investment returns of AI applications can keep pace with capital expenditure growth remains uncertain. Such concerns involve not only chip companies but are also beginning to affect large cloud service providers. As data center construction and AI infrastructure investment increase, related companies need to bear higher capital expenditures, depreciation, and financing costs. If cash flow generated by AI businesses cannot cover these expenses in a timely manner, corporate free cash flow could be squeezed, in turn affecting the market's judgment of their profitability and valuations. Previous Goldman Sachs research also noted that AI investment has become an important factor driving earnings growth for S&P 500 companies. Its research estimated that nearly half of the S&P 500's earnings-per-share growth in 2026 comes from the contribution of AI investment. At the same time, the scale of capital expenditures by large hyperscale cloud service providers remains huge, and related equipment depreciation expenses will continue to rise as investment increases. If capital expenditure growth slows in the future while depreciation costs continue to climb, AI investment's role in driving corporate earnings growth may gradually weaken. The high weighting of tech stocks in the S&P 500 also makes the cooling of the AI trade have a more pronounced impact on the overall market. The tech sector still accounts for more than 35% of the S&P 500. This means that even if other sectors perform relatively steadily, continued weakness in tech stocks could significantly drag down the S&P 500. More importantly, the AI investment boom also involves hyperscale cloud service providers classified in other sectors, so the impact of a cooling AI trade is not limited to the traditional tech sector. However, market views on the AI trade are not entirely pessimistic. Some Wall Street institutions believe the recent tech selloff may have overreflected concerns about tighter data center regulation, slower AI capital expenditures, and financing risks. Institutions including Morgan Stanley and UBS believe related policy risks may not necessarily bring AI infrastructure construction to a complete halt, and even if some projects are delayed, it may only push construction from 2028 to 2029. Meanwhile, Nvidia's upcoming earnings report and progress in AI company IPOs may also become important catalysts for the market to reassess the AI investment outlook. Therefore, the key to the current tech stock adjustment is not just whether AI investment is slowing, but that investors are reassessing the growth pace of the AI industry chain, the capital return cycle, and the valuation levels of related companies. If the market gradually confirms that AI demand remains strong, the recent selloff may be more of a valuation adjustment; but if corporate capital expenditure growth slows markedly while earnings expectations begin to be revised down, tech stocks could face more lasting pressure. However, according to data provided by London Stock Exchange Group (LSEG), despite last week's sharp tech selloff, the S&P 500's decline since early October has not been particularly severe, and the index is currently only about 4% below its record high. This also shows that although market sentiment has clearly weakened, the index as a whole has not yet seen a deep pullback of the same magnitude as some tech stocks. What needs attention next is whether the tech stock adjustment will further spread to other sectors such as financials, industrials, and consumer staples, and whether the market will shift from concentrated selling of large tech stocks to broader de-risking across risk assets. Overall, the S&P 500 is facing a dual test from technical and fundamental factors. On the one hand, above-expected inflation complicates the Fed's policy outlook, and rising Treasury yields may also weigh on equity valuations; on the other hand, the cooling of the AI investment boom is prompting investors to re-examine tech companies' capital expenditures, earnings, and cash flow performance. Against this backdrop, the 200-day moving average at 7,331 points and the support zone between 7,237 and 7,313 points will become important technical thresholds for judging whether this U.S. stock correction will deepen further. If these levels hold, the market still has a chance to digest previous valuation pressure through range-bound trading; but if key supports are breached one after another while earnings expectations begin to be cut, U.S. stocks may face a greater risk of drawdown.