Stock Rally Wanes After S&P 500 Touches 7,000 Mark

Abby Joseph Cohen, Professor at Columbia Business School, discusses markets and the broader US economic picture.

Wall Street traders left stocks near their all-time highs as investors looked to the start of the megacap earnings season for clues on the artificial-intelligence trade that has powered the bull market. With the Federal Reserve expected to stay on hold, bonds wavered. The dollar halted its slide.

Following a tech-led rally that drove the S&P 500 briefly above 7,000, equity gains faded. ASML Holding NV erased a surge that drove Europe’s most-valuable company to a record. Its solid results had earlier bolstered investor optimism about AI. Investors will get more clues on that front when Microsoft Corp. and Meta Platforms Inc. report later Wednesday.

Before that, Wall Street will go through a storm of Fed-related headlines. A decision to hold rates steady is likely to garner broad support from policymakers following a series of contentious cuts. Jerome Powell’s first press conference since the Fed was served grand jury subpoenas is bound to include questions about central bank independence.

“Rate cuts at the moment are not justified, given improving labor market data, stable inflation data and the simple fact that the Fed has just completed three rate cuts in a row,” said Glen Smith at GDS Wealth Management.

As for the start of the big-tech earnings season, Smith says he’s not expecting many surprises.

“The ‘Magnificent Seven’ names are still producing tremendous cash flows, and while some of their stock prices have underperformed the broader market, we still expect the tech sector to be among the best performing sectors in 2026,” he noted.

The S&P 500 wavered. The yield on 10-year Treasuries was little changed at 4.25%. The greenback rose 0.5% as Treasury Secretary Scott Bessent told CNBC the US hasn’t intervened to strengthen the yen, and touted the long-standing “strong-dollar policy.” The Japanese currency slid 0.9%. Gold briefly topped $5,300.

With geopolitical noise easing for now — having stolen the limelight from what’s been a relatively quiet year for AI so far — attention may soon swing back to where tech and AI fundamentals really stand, according to Jim Reid at Deutsche Bank AG.

Given lingering valuation concerns, investors are heading into the tech earnings season seeking clarity on AI demand and monetization, as well as capital investment guidance, according to Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.

Microsoft and Meta Platforms are the first of Corporate America’s four biggest AI spenders to report, with results from Alphabet Inc. and Amazon.com Inc. due next week. This year alone, the quartet is expected to have about $505 billion in combined capital expenditures, up from roughly $366 billion estimated for 2025, according to data compiled by Bloomberg.

Any hint that they plan to spend even more than anticipated on developing AI could weigh on the stocks, while simultaneously giving a boost to the companies benefiting from the largesse, like chipmakers Nvidia Corp., Broadcom Inc. and Micron Technology Inc.

“While higher capex is likely partially priced in, we expect cloud service provider revenue growth to accelerate during the quarter, and evidence that AI efforts are bearing fruit in terms of advertising engagement should also be viewed positively,” said Hoffmann-Burchardi. “AI will remain a key driver for equity performance, and see beneficiaries broadening into the intelligence and application layers.”

Hoffmann-Burchardi expects US equities to stay supported and forecast the

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