The S&P 500, Nasdaq 100 and Dow Jones Industrial Average have pulled back modestly from their highs for the year, even as corporate earnings growth continued and the artificial intelligence (AI) boom cooled.

The Nasdaq 100 fell to 29,187, down 6.9% from its highest point this month and its lowest level since September 16. Similarly, the S&P 500 dropped to 7,660, down 2.42% from its high for the year. The Dow Jones Industrial Average traded at 52,000, a modest decline from this year’s high of 54,757.

US Stocks to React to Top Corporate Earnings

The S&P 500, Dow Jones and Nasdaq 100 indices will react to several notable corporate earnings, continuing a process that started last week. SpaceX (NASDAQ:SPCX), GE Aerospace (NYSE:GE), and Netflix (NASDAQ:NFLX) will release their numbers on Tuesday, while Meta Platforms (NASDAQ:META) and Tesla (NASDAQ:TSLA) will publish their numbers on Wednesday.

FactSet (NYSE:FDS) data shows that 9% of S&P 500 companies have reported their results so far, with blended earnings growth at 29%. If that holds as the final figure, it will mark the third consecutive quarter of earnings growth above 25%. Strong earnings growth will likely lift the stock market.

Rising Crude Oil Prices

US stocks will also react to the rising crude oil prices. Brent touched the important resistance level of $110 on Friday, while the West Texas Intermediate (WTI) rose to $101. This rally has led to a surge in gasoline and diesel prices, with the latter trading at the highest level on record.

Rising crude oil prices have an impact on the stock market. For one, oil and gas companies like ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) benefit as their revenue and profits jump. 

On the other hand, it leads to higher inflation, which pushes the Federal Reserve to hike interest rates. Data released last week showed that the headline and core consumer prices rose 3.7% and 2.6%, respectively, moving further away from the Fed’s 2% target. These dynamics also push bond yields higher, which affects stocks.

AI Bubble Jitters

The S&P 500, Nasdaq 100, and Dow Jones will also react to the ongoing jitters in the artificial intelligence industry. Last week, most companies in the sector, including Nvidia, Micron, SanDisk, and AMD, fell as warnings about the industry grew louder.

One of the headlines was that Anthropic’s third-quarter revenue grew at a slower pace than expected. OpenAI’s annualized revenue was $20 billion lower than initially reported by prominent media companies. 

At the same time, bond yields of top AI companies like CoreWeave and Oracle continued rising, while Gartner warned of substantial impairments of AI infrastructure by 2030. Firmus, an Australian data center company, also cancelled its IPO as investors pushed back against its valuation. Similar headlines will likely push US stocks lower.

Image: Shutterstock