S&P 500 pulls back as technology and AI stocks come under pressure

The S&P 500 ended yesterday’s session down 0.26%, mainly as selling pressure returned to technology and AI-related stocks.

The Nasdaq also fell nearly 1%, while the Dow Jones still edged up 0.17%, suggesting that the market decline was not broad-based but rather reflected clear divergence between growth and value stocks.

Market breadth was not overly negative, as advancing stocks slightly outnumbered decliners on both the NYSE and Nasdaq.

However, selling pressure concentrated in large-cap technology stocks was enough to drag the broader index lower. This reflects the S&P 500’s high dependence on a small group of leading stocks.

When this group continues to rise, the index can remain supported; but when profit-taking emerges, high market concentration also makes the S&P 500 more vulnerable to pullbacks compared with the broader market picture.

Notable decliners included Broadcom, after its earlier business outlook disappointed investors and raised concerns over elevated valuations in the chip sector; Ciena, which fell sharply after announcing a convertible bond issuance; while Nvidia also came under mild pressure. These moves show that AI and semiconductor stocks remain a key pillar of market leadership, but also represent the biggest source of risk if growth expectations begin to be repriced.

Beyond sector-specific factors, the macro backdrop has also become less supportive for U.S. equities. Investors are turning more cautious ahead of the upcoming U.S. May inflation data, as energy prices remain volatile amid Middle East tensions and could add further pressure to CPI. A still-resilient labour market also increases the likelihood that the Fed will maintain a cautious policy stance and avoid rushing into early easing.

In the short term, the main focus will be the upcoming U.S. CPI report. If inflation cools, pressure from bond yields and policy expectations could ease, helping the S&P 500 stabilise. Conversely, if CPI comes in higher than expected, technology and AI stocks could remain under pressure due to elevated valuations and expectations that the Fed will keep interest rates higher for longer.

For now, the S&P 500 has not shown signs of broad-based weakness, but the recent pullback highlights concentration risk in technology and AI-related stocks. Until inflation data confirms a clearer cooling trend, the index may continue to trade cautiously, with stronger sector rotation rather than a broad market sell-off.