At the start of last week, the S&P 500 Index (SPX) hit a new all-time high of 7,620. However, the situation had changed by Friday, as quotes retreated from their peaks after the strong US labor market report. The data heightened concerns that the Federal Reserve (Fed) could maintain its hawkish stance for longer.
May’s Nonfarm Payrolls came in above expectations, thereby reducing the risk of an economic slowdown amid surging energy prices. Nevertheless, robust job growth typically has a quite ambiguous effect on the stock market. On the one hand, steady employment underpins consumer spending and corporate earnings; on the other, the resilient labor market makes rate cuts less likely.
Meanwhile, tech companies are now drawing particular attention. Their share of the S&P 500’s total market capitalization has reached record highs, increasing the index’s dependence on a handful of large issuers. Massive investments in artificial intelligence (AI) development continue to support a positive long-term outlook. But there is a catch: the recent explosive rally has made traders more susceptible to disappointing revenue forecasts, excessive optimism, and rising infrastructure costs. As a result, any short-lived corrections in the tech sector could ripple through the entire index. Last week was a vivid example.
From a technical standpoint, SPX has recently approached the 7,340 support level, from which prices have already rebounded three times. So, there is a high probability that this scenario will repeat itself, sending the index higher once again.
The ultimate recommendation is to buy SPX at the current price, targeting 7,650 within one month. To mitigate the risk of adverse market movements, place a Stop Loss order just below the 7,340 support level.
This content is for informational purposes only and is not intended to be investing advice.
