By Linh Tran, Market Analyst at XS.com
The S&P 500 fell to its lowest level since last November after posting three consecutive losing sessions, closing the latest trading day with a sharp decline of 1.52%. The move reflects a noticeable increase in market caution as investors begin to reprice rising macroeconomic risks.
According to data from The Street, around 68% of stocks in the market declined in the latest session, while only about 28% advanced. This suggests that selling pressure was not limited to a few sectors but rather spread across the broader market, reflecting a state of broad risk-off selling. In addition to the weakness in the S&P 500, other major U.S. indices also posted notable losses, with the Dow Jones falling 1.56% and the Nasdaq declining 1.78%.
The main driver behind the sell-off has been the widespread activation of risk-off sentiment as geopolitical tensions escalate, triggering a sharp energy price shock. Oil prices have surged in recent days, with WTI briefly approaching the $120 per barrel mark. Although prices have pulled back from those highs, oil is still trading at elevated levels around $95 per barrel. Persistently high energy prices increase the risk of inflation returning, reinforcing expectations that the Federal Reserve may need to maintain a tighter monetary policy stance for longer. At the same time, a stronger U.S. dollar combined with a steady rise in U.S. 10-year Treasury yields – currently around 5.255% – has added further pressure on equity markets.
Beyond macroeconomic factors, selling pressure has been particularly concentrated in technology and semiconductor stocks, which carry significant weight in major U.S. indices. Tesla fell 3.14%, Apple declined 1.94%, and Nvidia dropped 1.55%, while semiconductor stocks such as TSMC and Intel both fell more than 5%. These moves suggest that capital is flowing out of risk assets, particularly high-valuation growth stocks.
Additionally, according to Reuters, several major banks such as Morgan Stanley and JPMorgan have begun tightening lending conditions, raising concerns that financial conditions may gradually become more restrictive. This development has further heightened market caution amid fears of rising financial risks in an environment where interest rates remain elevated.
In my view, the S&P 500 may continue to face pressure in the near term as multiple macro risks are emerging simultaneously. Elevated oil prices, rising Treasury yields, and ongoing geopolitical tensions are making investors more cautious toward risk assets.
Another key factor the market is closely watching is the Federal Reserve’s interest rate decision next week. However, much of the market has already partially priced in a “higher for longer” stance from the Fed, particularly after the recent surge in oil prices and Treasury yields. Therefore, if the Fed simply maintains its current policy stance without signaling tighter policy than expected, the market’s negative reaction could be limited. On the other hand, if the Fed delivers a more hawkish message than anticipated, Treasury yields could continue to rise and place additional downward pressure on the S&P 500 in the near term.
