S&P 500: Can Bulls Ignite a Year-End Rally Despite AI Bubble Fears?

• Oracle’s cloud miss triggered fresh AI spending fears, pulling index futures lower.
• Traders await next week’s jobs data and global central bank meetings for direction.
• Tech sentiment hinges on yields staying stable while markets test key support levels.
• For a limited time, get an InvestingPro subscription at the lowest price of the year with our extended Cyber Monday discount.

US index futures fell back in early trade on Thursday as Oracle (NYSE:ORCL) reignited unease over the scale of AI spending. This comes just a day after the Fed’s rate cut, in a meeting that was deemed to be less hawkish than expected, while Jerome Powell’s calm tone at the FOMC press conference had also lifted sentiment.

With not much on the calendar for the remainder of this week, all eyes will now turn to the November jobs report due on Tuesday, with a string of major central bank meetings also lined up then to keep investors on their toes. The key question remains whether the S&P 500 will be able to ignite the seasonal end-of-the-year rally or whether concerns about AI will hold back the so-called Santa Rally.

Stocks Pull Back on Oracle Miss

Futures on the S&P 500 momentarily fell over 1% after breaking yesterday’s low, which basically wiped out all the post-FOMC gains and some before rebounding off the lows to trim its losses by half, as the European session got underway. Nasdaq 100 futures were holding steeper losses as technology shares were under pressure in premarket after Oracle tumbled more than 10% in premarket trade after cloud revenues missed expectations.

As a bellwether for AI investment, its update quickly soured risk appetite across the tech sector. Shares of NVIDIA (NASDAQ:NVDA) also fell in premarket, while other areas of the market also softened, with Bitcoin, for example, falling 2% to test the $90,000 level.

Valuation Worries in AI

Oracle’s numbers brought valuation worries and doubts over whether hefty AI infrastructure spending will pay off. Of course, this is not the first time these worries have surfaced. It was the same concerns that drove volatility in November, if one can recall. AI has powered much of the S&P 500’s impressive 2025 rally.

For now, it is too early to suggest we will see a repeat of the November volatility, but traders will need to be prepared for all eventualities. Perhaps if Broadcom’s (NASDAQ:AVGO) earnings, due after the close, also fail to live up to expectations, then that could sour sentiment further.

Keep An Eye on Treasurys

Whether stocks can push on from here will partly depend on the direction of bond yields. Remember, rising yields are typically not good for growth stocks. Before tech sentiment soured today, investors had taken comfort from the Fed leaving the door open to further easing. That and news of fresh bill purchases to rebuild bank reserves caused Treasurys to bounce back, weighing on their yields.

If yields can stay low, then that should be a positive factor for stocks; else, they could apply further pressure on the tech sector.

S&P 500 Technical Analysis

Technically, the bullish trend is still intact despite the drop in S&P 500 futures. Let’s see how markets will close today’s session before passing on a firm judgment on the technical direction of the markets.

For as long as the shaded blue area between 6790 to 6812 holds firm, this should keep the bulls happy. This area was prior resistance and marks the 21-day exponential average.

However, a break below here and the bears will be interested again. In that case, a drop to the next support at 6731 would be the next logical market reaction. Below that 6700 would be in focus next, with 6600 a slightly longer-term bearish target.

Meanwhile, if the prevailing bullish trend holds, then 6900 is the key level to watch. Here, the market has struggled to get past on several occasions. A closing break above it, would therefore be a positive move as it would end the multi-day consolidation. In that potential scenario, a new high above October’s peak of 6953 would be the most likely outcome.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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