S&P 500 breaks key support as investors reassess market risks

The S&P 500 has come under significant selling pressure, with Thursday’s 4.4% decline highlighting a sharp deterioration in investor sentiment. The sell-off was largely driven by technology and semiconductor stocks, as markets began questioning whether the artificial intelligence investment boom could face growing regulatory and financial pressures.

Concerns surrounding potential restrictions on data-centre expansion following the US midterm elections have raised questions about future infrastructure spending. This matters because expectations of sustained AI investment have been a major contributor to earnings growth and equity valuations.

Meanwhile, the Federal Reserve remains another source of uncertainty. With inflation still elevated and policymakers maintaining a cautious stance, investors face the possibility that interest rates could remain restrictive for longer than previously anticipated.

Together, these developments create an uncomfortable backdrop for equities. If concerns over AI spending translate into weaker earnings expectations, while inflation prevents the Fed from easing monetary conditions, investors may continue reducing exposure to risk assets.

Technical analysis — SPX (four-hour)

From a technical perspective, the S&P 500 has broken below its ascending channel and the anchored volume-weighted average price (VWAP), currently situated around 7,475.

This is a significant development, as the anchored VWAP represents the average price paid by investors, weighted by trading volume, since the selected anchor date. A sustained move below this level suggests that investors who accumulated positions during that period are increasingly sitting on unrealised losses.

Consequently, any recovery towards the anchored VWAP could encounter renewed selling pressure, particularly if investors use the rebound to reduce exposure.

As long as the index remains below the 7,475–7,550 resistance region, the near-term outlook remains vulnerable to further downside.

The next notable support area sits around 7,243–7,250, corresponding to the 38.2% Fibonacci retracement of the rally from the March 2026 lows. This level could attract buying interest, although a sustained break beneath it would expose the possibility of a deeper correction.

Conversely, a recovery above the anchored VWAP, accompanied by improving risk sentiment, would suggest selling pressure is beginning to ease.

For now, the combination of deteriorating technical structure, uncertainty surrounding AI investment and restrictive monetary-policy risks leaves the S&P 500 exposed to further selling pressure.