US Tech forecast: the index recovers after last week’s sharp sell-off

The US Tech index rally continues, with the benchmark hitting a new all-time high ahead of key US labour market data. The forecast for the US Tech for the upcoming week is positive.

US Tech forecast: key trading points

• Recent data: the preliminary Philadelphia Fed Manufacturing Index came in at -12.8 in October
• Market impact: increased intraday volatility is likely for the technology sector

US Tech fundamental analysis

The drop in the Philadelphia Fed Manufacturing Index to -12.8 in October, against expectations for a positive reading and following -23.2 previously, signals a sharp deterioration in business sentiment across the Mid-Atlantic manufacturing region. A reading below zero means that more firms reported worsening conditions than improvement. For markets, this indicates weakening industrial momentum at the start of the quarter: capacity utilisation is declining, companies are more cautious with orders and investment plans, and inventory accumulation risks are growing.

For the US stock market, the main influence channels are as follows. First, earnings expectations for cyclical companies become more conservative, as producers of equipment, materials, transport, and logistics are sensitive to slowing industrial demand and may revise production and margin plans. Second, weaker data often push Treasury yields lower due to expectations of looser financial conditions, supporting the valuation of companies with long-duration cash flows, where much of the value lies in the future. Third, reduced visibility encourages sector rotation: investors temporarily prefer firms with stronger balance sheets and more stable cash flows, affecting the relative performance of different market segments.

US Tech technical analysis

For the US Tech index, the overall impact is slightly negative. Lower Treasury yields reduce discount rates for future cash flows, which supports large-cap platforms with recurring revenue models such as cloud services and software subscriptions. However, weaker industrial activity is a drag on segments tied to real production – semiconductor equipment makers, industrial IT solution providers, sensor manufacturers, and automotive and factory component producers. Companies whose demand depends on clients’ capital expenditure in manufacturing may face more cautious orders and project delays.

The US Tech index has entered a downtrend. The resistance level has formed at 25,175.0, while a new support zone has emerged near 24,200.0. It is difficult to assess how long the current trend might last. The next downside target could be at 23,460.0.

The following scenarios are considered for the US Tech price forecast:

• Pessimistic US Tech scenario: a breakout below the 24,200.0 support level could push the index to 23,460.0
• Optimistic US Tech scenario: a breakout above the 25,175.0 resistance level could drive the index to 25,480.0

Summary

The sharp decline in the Philadelphia Fed Manufacturing Index is a negative macroeconomic signal for US cyclical sectors and a short-term pressure factor for the broader market. For US Tech, the impact is more negative: industrial sector weakness and cautious corporate spending reduce visibility for IT firms. The trend will depend on the balance between incoming macroeconomic data, Treasury yields, and the pace of resolution of the US fiscal impasse. The next downside target for the index could be at 23,460.0.

Open Account