US stock index futures had a positive start yesterday morning. But they fell back sharply soon after the main exchanges opened. Much of the blame has been levelled at Iran’s drone and missile attack on Israel, and on the fears of reprisals from the latter escalating hostilities further. But investors have had a growing sense of unease since the beginning of April. To begin with, investors welcomed the pull-backs as rare opportunities to add to long-side exposure. But some of the daily sell-offs we’ve now seen are large enough to rattle confidence. So far this month, the Dow, S&P 500 and NASDAQ 100 have had four days with losses of over 1%. The mid-cap domestically-focused Russell 2000 has had six such days. This rather undermines the argument that everything is ok with the stock market because of the breadth of the rally since October. In fact, while the Dow, S&P and NASDAQ have spent the last four months hitting a succession of record highs (until this month), the Russell has failed to get much closer than 12% below its own record from back in November 2021. Adding to recent worries is the break-up of the ‘Magnificent Seven’, those tech giants which were at the forefront of the market’s advance for so long. Not only has Tesla seen its own ejection from the group due to its dismal performance (it’s down 36% since the beginning of this year alone), but Apple has lost 14% since its all-time high back in December, and NVIDIA has fallen 12% over the last six weeks. On the plus side, the other four members are all within easy reach of their own recent highs, and given the spectacular gains we’ve seen in many of these stocks, a pull-back is well overdue. The question is whether this is a healthy one, or if it is the start of something more serious? We know that looser monetary policy is coming, but we don’t know when. Stronger economic reports, like yesterday’s Retail Sales, make it less likely that the Fed will be hurried into cutting rates. The next challenge is the earnings season, and today brought a clutch of important reports. Chart wise, we’ve already seen the major indices break below some significant levels and the momentum is definitely to the downside. But if the indices can find a floor over the next day or two, some confidence could return and a recovery is possible. Even so, caution is required now, more than ever.