Yesterday, equity indices finished mixed. The S&P 500 rose by 0.21%, while the Nasdaq 100 fell by 0.22%. The Dow Jones Industrial Average strengthened by 1.03%.

Today, South Korea's benchmark plunged by 6.5% before trimming some intraday losses (it had fallen as much as 13% earlier in the session). SK Hynix tumbled by 10% after a 557% year-on-year rise in quarterly profit failed to meet elevated market expectations, and shares of peer Samsung Electronics — due to report on Thursday — fell by 6.6%.

The Korea sell-off dragged the MSCI Asia Pacific index down roughly 1%, threatening its weakest close since April. Nasdaq 100 futures pared earlier losses to about 0.4%, yet the tech gauge is down for a fifth straight session, marking its longest losing streak this year. European markets look set to open modestly lower, with bank earnings in focus.

Sentiment was further dented by a rise in oil. Brent jumped by 3.5% above $87/bbl, rebounding from the largest three-day drop since April 2020 and reviving inflation concerns ahead of the Fed's interest rate decision due later Wednesday. The move followed US statements that they had intercepted an "urgent attack" by Iran on US forces and struck back. Renewed hostilities in the Middle East have refocused attention on the Strait of Hormuz, and the risk of supply disruptions threatens to stoke inflation just as markets wait for the Fed, adding another layer of uncertainty for investors already exiting tech names. Clearly markets remain sensitive to any escalation around Hormuz.

The core driver of the tech sell-off is rising scepticism about the returns on the massive AI investments by the world's largest tech firms. These concerns are dominating price action: AI-leader stocks are falling even when companies beat earnings estimates.

All of this creates a challenging backdrop ahead of the largest US tech reports. Microsoft and Meta are set to report on Wednesday; Apple and Amazon follow on Thursday. Beyond earnings, traders are focused on the Fed decision: the central bank is widely expected to hold interest rates unchanged after its two-day meeting, though markets still consider an unexpected hike possible as patience with high inflation wanes. The Bank of England will hold a meeting on Thursday and the Bank of Japan on Friday, capping a busy week for central banks.

Technically, the daily S&P 500 chart shows that the immediate task for buyers is to overcome the resistance level of $7,451. Doing so would confirm further upside and open the path to $7,474. Maintaining control above $7,495 would further strengthen buyers' positions. On the downside, buyers must defend $7,427. A break below that level would likely push the index back to $7,404 and open the way to $7,381.