The S&P 500 is churning under the surface

• The calm and consolidation in the US equity market are deceptive.
• The S&P 500 is paying closer attention to macro risks.

The S&P 500 closed July with a modest gain, yet beneath the calm surface, real storms were brewing. These began to surface halfway through the corporate earnings season, when results from the ‘Magnificent Seven’ led to significant volatility in their shares. Whilst Microsoft recorded the largest increase in market capitalisation in stock market history and Amazon’s shares jumped by 15%, Apple and Meta Platforms suffered their worst selloffs since Liberation Day in April 2025.

While the markets are racking their brains over whether Big Tech will reap the rewards of its colossal investments in artificial intelligence, cloud computing business models appear fairly straightforward.  Companies purchase buildings and equipment and lease them out to recoup their costs. Meanwhile, the 39% rise in operating profit at Amazon Web Services has driven up shares across the entire consumer discretionary sector, to which the issuer belongs.

By contrast, the technology sector ended the last day of July in the red due to setbacks at Apple, which reported component shortages affecting its products. Such significant volatility within the Big Tech sector is depriving the stock market of its safety net. Previously, the S&P 500 had turned a blind eye to challenges such as tariffs, geopolitics or the Fed’s intentions to raise interest rates. The stock index had been rising steadily, driven by investor interest in artificial intelligence. It is now paying closer attention to macroeconomic risks.

The S&P 500’s reaction to the outcome of the July FOMC meeting was telling: the stock index suffered a significant dip as the number of Fed officials prepared to vote for tighter monetary policy increased. Admittedly, the following day, it turned a blind eye to the disappointing second-quarter GDP figures, influenced by the narrative that Kevin Warsh was in no hurry to raise interest rates. However, the fact remains: the US equity market is beginning to look beyond artificial intelligence technologies. All the more so as the corporate earnings season has passed its halfway point.

In this regard, developments in the Middle East and the release of the US July employment data could lead to significant volatility in the S&P 500.

The FxPro Analyst Team