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US equity futures surged overnight, lifted by blockbuster results from Microsoft and Meta, as the tech giants reinforced investor optimism around artificial intelligence. Microsoft soared more than 8%, while Meta climbed 12%, both posting results well ahead of expectations and signalling continued aggressive investment in AI infrastructure. With more tech earnings to come today, sandwiched between key economic releases, and not to mention the August 1 tariffs deadline looming tomorrow, markets will face heightened volatility in the next day and a half.

Before discussing the macro factors further and what to watch, let’s quickly turn our gaze to the charts first.
 

S&P 500 continues to make new highs

With the S&P 500 futures at new record levels, the bullish trend is continuing for now, meaning dip-buying remains the preferred trading strategy until we see a change in the market structure of higher highs and higher lows.
 

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Short-term support now comes in at 6,435, marking the high from Wednesday, followed by the day’s close at 6,396, before those earnings caused the S&P 500 futures to gap. Below these levels, 6,333 is another important support level that needs to hold. As well as prior resistance, the 21-day average comes into play here too. Only if we go below this level, can we then talk about the possibility of a deeper pullback towards the old records set earlier this year around the 6,150-6,166 area.

On the upside, there is clear blue skies, and it is anyone’s guess where the next resistance will come. Still, it is important to keep an eye on round handles like 6,500.

Meanwhile, keep an eye on the Relative Strength Index (RSI) which continues to trade at overbought levels of above 70. It will need to unwind through price action (i.e., a sell-off) or time (i.e., consolidation). The latter would be a bullish outcome, the former bearish.
 

Big Tech keeps rallying going for now

The S&P 500 futures rose by 1% overnight, but let’s see if the gains can hold heading deeper into the week. Markets are currently being pulled in two directions: on one hand, a powerful earnings season led by tech is providing real momentum for equities. On the other, ongoing trade tensions and central bank policy ambiguity are acting as counterweights. For now, investors are choosing to focus on the former — but the balance remains fragile. Much will hinge on the next data prints and whether Trump’s tariff barrage finds traction in the real economy.

Microsoft’s performance now puts it within striking distance of a $4 trillion market capitalisation – if it can hold onto some of those pre-market gains into the cash open. It is certainly among the biggest stock gainers today.

Amazon and Apple are next in line, with results due later after the close today. Markets will be watching closely to see if the momentum continues in the AI trade and whether the rest of the Magnificent Seven will deliver this quarter. So far, they’ve not disappointed.

So, it is the big rally in Big Tech which is helping to keep the S&P 500 rally going for now, with investors growing worried about the impact on inflation of Trump’s tariffs. This has also worried the Fed, raising uncertainty over the path of interest rates.
 

Tariffs: Trump Ups the Ante

On the trade front, tensions have escalated after President Trump announced a 15% tariff on South Korean imports, matching measures previously levied on Japan, alongside a demand for $350 billion in US-bound investment from Seoul. India has also been targeted, facing a 25% levy, with Washington citing its continued purchases of Russian oil and defence equipment. However, spared the most traded forms of copper while slapping others with duties of up to 50%.

These moves come ahead of the August 1 deadline set by the White House, with countries lacking bilateral trade agreements facing potential blanket tariffs ranging from 15% to 50%. Trump’s gambit, aimed at reshaping global trade and bringing manufacturing back onshore, has so far not caused a major long-lasting drop in markets, beyond that swoon in early April. With indices now at record levels, Trump appears to win market’s vote of confidence with his trade tactics.
 

September rate cut no longer a sure thing

Fed Chair Jerome Powell delivered a hawkish hold, emphasising that no decision has yet been made regarding a September policy cut. While two Fed officials — Bowman and Waller — dissented in favour of a cut, Powell remained steadfast in his view that inflation risks remain present, and that a modestly restrictive stance is still warranted.

Expectations that inflation could take a boost from tariffs in the coming months has helped to support bond yields and the dollar. In reaction to Powell’s hawkish press conference, markets quickly adjusted expectations, with pricing for a September rate cut slipping from 16 basis points to just 11. Powell’s remarks placed him squarely at odds with the White House, with Trump continuing to demand multiple rate cuts.

The hawkish repricing of the Fed’s policy has also been bolstered by strong GDP data and expectations that core inflation may remain sticky. Traders are now focused on upcoming economic prints — particularly today’s core PCE numbers and Friday’s jobs data — which could further influence rate expectations.

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