Dow Jones, Nasdaq, S&P 500 preview: All eyes on Meta, Tesla, SpaceX earnings

Investing.com -- U.S. stocks fell Friday, closing out a mostly losing week as investors retreated from technology and AI-linked names while oil prices rose.

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The S&P 500 dropped 1.09% to 7,659.44, and the Nasdaq Composite tumbled 2.14% to 26,140.03, with both indexes finishing below their 50-day moving averages. The Dow Jones Industrial Average slipped 175.28 points, or 0.34%, to 52,002.41. The Cboe Volatility Index climbed above 22 for the first time in four months.

Semiconductor stocks were again at the center of the pullback, with the SOXX ETF falling 4.14%. Those losses, alongside broader weakness in AI-related shares, pulled the S&P 500 down about 2% for the week. The Nasdaq posted its worst weekly performance since June, down more than 4%, while the Dow managed a 0.7% weekly gain.

Despite the rout, the S&P 500 remains only about 2% below the record high it set earlier this month. Sectors that had lagged during last month's tech rally, including healthcare and consumer staples, posted solid gains over the week.

The recent stumble in the AI trade, which has powered much of the market's rally this year, faces a key test in the coming days as investors turn their attention to a wave of corporate earnings. Meta Platforms, one of the hyperscalers pouring billions into AI data center buildouts, headlines this week's reporting calendar.

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Also set to report this week are chipmakers Lam Research and Texas Instruments, along with Elon Musk's SpaceX and Tesla. Netflix, consumer goods maker Procter & Gamble, and engine manufacturer GE Aerospace are also scheduled to report earnings.

Additionally, investors this week will parse a fresh batch of economic data, including housing starts and building permits, weekly jobless claims, and preliminary S&P Global PMI readings alongside the University of Michigan's consumer sentiment survey.

JPMorgan: "If bond yields are stabilizing, that will help equities, through allowing the cycle to look more sustainable, through reducing pressure on AI funding, as well as on consumer finances, and through reducing the drive for P/E compression. Indeed, during the most intense phase of yields spiking, forward P/E for AC World fell by 3 points, for SPX by 3 points and for Europe by 2 points. The multiple compression might not need to continue."

Goldman Sachs: "Equity prices should continue to rise as long as earnings grow. Positive but decelerating growth has historically been associated with positive but moderating S&P 500 returns. Equity returns in these environments have historically been driven by earnings growth rather than by valuation expansion. Within the market, a backdrop of positive but decelerating growth usually supports the outperformance of companies with secular growth over those with cyclical growth as well as stocks with price momentum, positive earnings revisions, and low volatility."

Morgan Stanley: "We favor quality in U.S. equities, but see recent volatility creating opportunity in higher-quality cyclicals given still-resilient growth. Capital Goods stands out, and has improving revision breadth."

Evercore ISI: "Last week's NDX selloff was the beginning of the price discovery process as a "perfect storm" for AI/Tech laid down "lines in the sand" that if crossed would transition the AI bull market into a correction, and if accompanied by a recession, could produce an equity bear market."

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