Last Friday, equity indices closed mixed but with a positive tone. The S&P 500 rose by 0.19%, while the Nasdaq 100 eased by only 0.03%. The Dow Jones Industrial Average strengthened by 0.66%. The yield on benchmark 10?year US Treasuries dipped by one basis point to 4.18%.
Equity markets have recouped earlier losses and continued last year's rally, driven by advances in artificial intelligence, as investors increased exposure to technology stocks despite rising geopolitical tensions following US actions against Venezuela.
Asian equities jumped by 1.6% to record levels, led by chipmakers such as Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. The emerging markets index was close to a record high.
Optimism fueled by AI gains has so far outweighed concerns about the potential economic fallout from the military conflict. Investors appear confident that tech giants can generate sufficient profits to offset any negative effects of geopolitical instability. Still, such a pronounced tilt toward the technology sector raises questions about the sustainability of the current market environment. Lack of diversification could leave markets vulnerable to shocks, especially if geopolitical tensions worsen. There is also the risk of AI?linked stocks being overvalued, which could result in a painful correction down the road.
After US actions over the weekend aimed at toppling Venezuela's president Nicolas Maduro, silver jumped by 4.8% and gold rose by 2%. Oil prices, however, showed only limited movement amid worries about global supply. For now, risk appetite is ignoring concerns that geopolitical tension could cap the rally that produced the largest annual gain in global equity markets in eight years.
According to Saxo, artificial intelligence is still the main factor influencing markets, and optimism toward tech companies continues to outweigh other market drivers.
Following the US attack on Venezuela and the ouster of Nicolas Maduro, US President Donald Trump announced large plans for the country's oil industry and its vast reserves. Acting Venezuelan President Delsy Rodriguez appealed to the US for cooperation, taking a more conciliatory tone toward the Trump administration after initial outrage over Maduro's removal.
As for technical S&P 500 analysis, the immediate task for buyers is to break through the nearest resistance level of $6,871. Clearing that level would signal further upside and open the path to $6,883. An equally important objective for bulls is to secure control above $6,896 to strengthen their position. In case of a downside move amid falling risk appetite, buyers should defend around $6,854. A break below this level could quickly push the index back to $6,837 and open the way to $6,819.
