Tech bounces after a brutal week, but the worries linger

Wall Street caught its breath on Monday after a punishing week. The Nasdaq rose 1.1% and the S&P 500 added 0.4%. Fears about heavy borrowing at AI firms like CoreWeave eased a little, chip stocks revived, and the semiconductor sector's longest losing streak in about two decades looked set to end. Lower oil and steadier Treasury yields helped too.

One good day shouldn't settle anyone, though. Many analysts say the selloff isn't about AI demand getting worse but about how the buildout is being financed with borrowed money. PIMCO said bond investors are starting to impose discipline on borrowers with uncertain cash flows. The other side points to TSMC's 41% sales growth and calls the reaction overdone, and the debate is evenly matched.

Under the surface, the market looks fragile. The Nasdaq 100 is 6.5% below its October 6 peak, more than half of S&P 500 stocks sit below their 50-day averages, and while the index has set 28 record highs this year, two-thirds of its stocks have gone nowhere. Long-term yields ticked up again on Monday, and some strategists even raise the possibility of a Fed hike in October.

That makes this week's big-tech earnings, from Meta, Tesla and Netflix, a turning point. It's encouraging that 43 of the first 48 S&P 500 companies to report beat forecasts, but one strategist put it bluntly: apart from earnings, there's nothing fundamental to calm nerves.