Tech indices pared losses into the start of the European session, giving investors a brief breather after fresh pressure on the AI complex. South Korea's Kospi returned to flat after a 4.1% drop, and chip stocks including SK Hynix recovered, rising by 4%. The MSCI Asia-Pacific index eased roughly 0.2% after earlier sliding as much as 1.1%. Nasdaq 100 futures were a touch higher, up about 0.1%.

Yesterday's sell-off was deep and fairly violent. On Thursday, chipmakers plunged on Wall Street, and the Nasdaq 100 suffered its worst day since June. The selling hit the tech cohort that powered the four-year US bullish run after mega-cap results raised concern that the rebound since late March had gone too far, too fast. The Nasdaq 100 is set for a second straight weekly loss, the first consecutive drop since July.

Where did the money go? Into defensives. US utilities and health-care stocks rallied, as did Treasuries, which staged their biggest rally in more than two years. The 10-year yield fell by 17 bps and slipped below 5% for the first time in a month. Spreads on USD-denominated bonds of high-grade Asian issuers widened to the largest level since July last year.

More tests lie ahead. Next week, Microsoft, Amazon, and Alphabet report, and the Fed will announce its interest rate decision. Traders have already pared expectations for another hike this year. The market is increasingly pricing in the risk that the AI boom is topping out — the bubble may already be deflating. With US midterms approaching, stabilization could take time, and some investors are de-risking in advance.

Geopolitics remains a factor. Escalating attacks on Saudi Arabia elevated the odds of broader supply disruptions, supporting demand for safe havens. Oil keeps rising: Brent gained about 1% to $114.35/bbl after a 4% jump the prior day, and the crude benchmark is on track for a third consecutive weekly advance.

All this indicates that the market is re-pricing the AI trade, and expensive oil leaves little room for optimism. In my view, unless Microsoft, Amazon, and Alphabet report strong beats next week, tech stocks will remain under pressure while defensive sectors and bonds continue to attract flows. If the reports disappoint, a replay of Thursday's action is entirely plausible.

As for S&P 500 technicals, the immediate task for buyers is to overcome the resistance level of $7,679. That would signal upside and open a path to $7,698. Holding $7,718 is also important to strengthen bulls' positions. On the downside, buyers should step in near $7,656. A break below that level would likely push the index down to $7,633 and open the way to $7,601.