DAX 40 and S&P 500 Test Key Floors Ahead of Fed and ECB Decisions

The S&P 500 and DAX 40 are testing important technical support levels after a volatile stretch driven by concerns over artificial intelligence capital spending and elevated Treasury yields. The S&P 500 closed at 7,659.44 on 20 October, down 1.95% from the prior session, after printing a bearish engulfing pattern on the weekly chart. The index opened at 7,813.04, reached a high of 7,821.67, then fell to 7,631.77 before settling near session lows. The DAX 40 recovered from an early dip of approximately 1% to close at 25,622.61, up 2.13% for the week and ending a six-week run of lower highs and lower lows. Despite the weekly gain, the German index remains inside a falling channel that began in late August.

Technology sector pressure intensified after concerns emerged about the return on heavy AI infrastructure spending. Chip stocks fell sharply, with the Philadelphia Semiconductor index dropping 12% last week. Asian markets felt the brunt of the selling, with the Nikkei 225 down 1.30% and concerns rippling through Korean chipmakers. Rising US 10-year yields near 5.11% have amplified the pain for capital-intensive sectors, while Brent crude near $110 per barrel on Middle East supply risks adds to the inflationary backdrop.

Earnings from major technology firms will provide critical tests of whether current valuations can be justified. Meta and Tesla report after the US close on Wednesday, with Tesla's quarterly vehicle deliveries already exceeding consensus expectations. Any compression in profit margins or cautious forward guidance could accelerate downside pressure across both the Nasdaq 100 and S&P 500. Industrial earnings have provided some support, with the Dow outperforming on strength in names like 3M and Merck, but breadth remains thin.

What the calendar says

The Federal Reserve decision at 18:00 UTC on 28 October is expected to hold rates steady, but December rate-hike expectations are heavily priced in following persistently high inflation readings. The outcome will influence Treasury yields, the dollar and equity risk appetite heading into month-end. One day later, the European Central Bank announces its rate decision at 12:15 UTC on 29 October, with implications for eurozone bond markets and the DAX 40 in particular. French fiscal concerns remain in focus ahead of a Moody's review on 23 October. The Bank of Japan policy decision on 30 October will be watched for any shift in its ultra-loose stance, though the timing has not been fixed. Flash purchasing managers' index readings on Friday will offer an early snapshot of economic momentum across major economies. The full schedule is available on our economic calendar.

S&P 500 technical picture

The S&P 500 chart shows price at 7,665.68 sitting just above its short-term moving average near 7,734 and inside a rising channel that began in late July. The index tested support at 7,631.77 during Tuesday's session and has re-entered a symmetrical triangle pattern after a brief breakout attempt. Key support lies at 7,601, which represents the lower boundary of the channel and the 50-day exponential moving average zone. A break below that floor would open the door to 7,520 and signal a deeper consolidation. On the upside, a move above 7,755 would confirm a breakout from the triangle and target the record close of 7,818.93 set on 5 October, with further resistance at 7,950. The relative strength index at 51.35 sits in neutral territory, offering no strong directional signal.

DAX 40 technical picture

The DAX 40 chart shows price at 25,242.05 inside a descending channel from the late-August high. The index sits just above its 200-period moving average near 25,269 after testing a low around 25,050 earlier in the session. Resistance overhead comes in at 25,430, which aligns with a shorter moving average, and 25,678, near the channel roof. A sustained break above 25,430 would challenge the downtrend, while failure to hold 25,050 would expose the early-October low near 24,850. The relative strength index at 47.68 is marginally above its signal line but remains in neutral territory, reflecting the index's consolidation within the falling channel. Both indices face critical tests from earnings and central bank decisions over the next seven days.