US markets face volatility amid Fed policy shifts and sector rebalancing

Global financial markets are navigating a period of transition as investors react to Federal Reserve policy expectations and shifting sector trends. While the Nasdaq has maintained demand despite more hawkish Fed expectations following strong US labor market data, the DAX is currently holding above key support levels.

In the technology sector, institutional investors are beginning to rebalance portfolios by moving into defensive positions to offset high exposure to Artificial Intelligence (AI) stocks. This shift comes amid rising oil prices and increasing US bond yields. While Broadcom has provided strong profit estimates for fiscal year 2028 due to AI demand, its current quarterly revenue guidance fell short of market expectations.

In the retail sector, Lululemon shares dropped 20% following disappointing quarterly results and weak sales forecasts, signaling increased consumer selectivity in the US. Meanwhile, the S&P 500 has shown divergence, with the energy sector performing strongly while consumer cyclicals faced pressure.