The market remains focused on strong S&P 500 corporate results, while the macro backdrop looks weaker. As the earnings season winds down, investors are tense and shifting attention to Middle East developments and the Federal Reserve. Most are waiting for the flagship report from NVIDIA, which is why the current state of the US equity market feels like calm before a storm.

US equity indices performance

For roughly 90% of S&P 500 companies that have reported Q1 results, earnings rose about 28% — the best print since 2021. Chipmakers have been the growth locomotive: supply shortages pushed prices up and delivered blockbuster results, outpacing oil producers despite the Brent and WTI rally tied to Middle East tensions.

However, the higher chip stocks climb, the more parallels emerge with 1999. The sector rose by 264% before the dot?com crash. Today, it is up about 135%. Given higher interest rates and the speed with which global investors can exit equities, the risk of a faster?moving bubble collapse is real.

Chip and oil?producer index dynamics

Trouble can come from inside the market or from the outside. LPL Financial estimates that higher shipping costs, supply chain disruptions from a blocked Strait of Hormuz, and uncertainty in energy markets could shave 0.2 percentage points off US real GDP in Q2 and 0.3 percentage points in Q3. The situation could worsen if the Fed tightens policy.

Kevin Warsh was initially viewed by markets as someone likely to cut the federal funds rate after taking over the Fed. Current conditions, however, point toward monetary tightening rather than easing. The market now prices in roughly a 50/50 chance of higher borrowing costs by end?2026 — an outcome investors would dislike and one that could be costly for the S&P 500.

Investors are increasingly focused on Middle East developments. The broad index fell after reports that both the US and Iran rejected each other's peace proposals, but recovered much of the loss after optimistic rhetoric from President Donald Trump. The White House said it had paused an order to resume strikes on Iran, citing requests from mediators including Qatar, Saudi Arabia, and the UAE.

Technically, the daily S&P 500 chart shows a pin bar with a long lower wick, indicating bear weakness. Sellers failed to drive the index down to the moving averages. That creates a buying opportunity off the pin?bar high near 7,430.