The S&P 500 Hovers Near 5,500 as U.S Yields Rise

Stocks struggled to gain significant momentum as a rally to all-time highs spurred concerns of a near-term pullback amid signs of buyer exhaustion.

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The S&P 500 briefly surpassed the historic 5,500 mark, staying above a technical threshold that typically suggests an overbought market. The performance of big tech was mixed, with Apple Inc. experiencing a decline while Nvidia Corp. approached a new peak. Treasuries, after nearly erasing this year’s losses, retreated.

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"Despite the ongoing bullish momentum for the S&P 500 and Nasdaq, the combination of near-term overbought conditions and deteriorating market breadth makes equities susceptible to a pullback or correction," stated Craig Johnson from Piper Sandler.

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Economic data pointed largely to weakness, with new home construction falling to its slowest pace in four years and the Philadelphia Fed Index underperforming estimates. US initial jobless claims remained relatively stable at 238,000 last week.

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The S&P 500 saw a slight increase, primarily driven by gains in energy shares. Dell Technologies Inc. experienced a rise after CEO Michael Dell announced the company is developing a “Dell AI factory” for Elon Musk’s startup xAI in collaboration with Nvidia. Banks, however, saw a decline.

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Treasury 10-year yields rose by six basis points to 4.28%. The dollar strengthened. Traders are now betting that the Bank of England will reduce interest rates in August following signals from policymakers indicating a willingness to start easing monetary policy.

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Although the S&P 500 continues to set new records, a decreasing number of stocks are contributing to this year’s rally.

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Data compiled by Bloomberg through the end of last week reveals that nearly a third of S&P 500 constituents have hit a one-month low in the past month, which significantly outnumbers those pushing the index higher. Only 3.2% of the stocks reached a one-month high, including Apple Inc. and the surging Nvidia Corp., which recently surpassed Microsoft Corp. to become the world’s most valuable company.

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“With the sustained robust demand for AI and its potential to disrupt and transform industries in the coming years, we believe it is crucial for investors to ensure they have adequate exposure,” commented Solita Marcelli from UBS Global Wealth Management.

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Meanwhile, several measures indicate weak market breadth, increasing uncertainty about the rally’s durability. For instance, the NYSE advance-decline line, a widely followed indicator that tracks the number of securities rising minus those falling on the exchange each day, closed at a new six-week low on Friday.

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