U.S Stock Rally Momentum is Waning According to the S&P 500

Beneath the surface of the U.S. stock market's surge to new highs this month, signs are emerging that the rally might be losing steam.

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The S&P 500 has now gone 17 consecutive trading sessions without a single-day move of 1% or more in either direction — the longest period of calm since last December. For Matt Maley, chief market strategist at Miller Tabak & Co., this extended stretch of subdued trading suggests that the market's previous strength is beginning to fade following its sharp bounce from the tariff-related selloff in April.

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Despite the backdrop of headline-grabbing stories about Federal Reserve Chair Jerome Powell’s job security and ongoing trade tensions with China, investor enthusiasm seems to be waning. According to Maley, many market participants are growing restless as they wait for a broader base of stocks to participate in the rally that has so far been heavily reliant on major tech companies.

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"When a rally is concentrated in only a few names and starts to stall, it usually reflects investors’ growing desire for a more widespread upswing," Maley explained. "If that doesn’t happen, they tend to step back and reassess."

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There’s little surprise in that reaction, especially now, with earnings season only beginning, trade talks still uncertain, and the Federal Reserve not expected to cut rates in the near future.

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Aaron Nordvik, a macro equity strategist at UBS Securities, shares the sentiment that the forces that had been lifting the market may be fading. For instance, July is historically a strong month for equities, but the positive seasonal trend may already be reflected in prices.

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"I’ve been optimistic about stocks for a while," said Nordvik. "But at this point, most of the favorable news has already been priced in." Although he doesn't foresee a steep decline, he believes that the balance of risk and reward in the equity market has become less appealing compared to just a few weeks ago.

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This week could bring renewed volatility, especially with earnings reports expected from two of the "Magnificent Seven" megacap tech giants that have driven much of the market's gains in recent years: Tesla and Alphabet (Google’s parent company). Wall Street will be closely monitoring these updates for insight into their capital spending — particularly related to artificial intelligence, which has been a hot investment theme.

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Adding to the tension is the upcoming Federal Reserve policy meeting on July 30. While it’s widely expected that the Fed will keep interest rates unchanged, investors will be paying close attention to any comments from Chair Powell. There’s speculation about whether he will respond to President Trump’s ongoing pressure to lower rates — or even to reports suggesting Trump considered removing him from his position.

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Despite these uncertainties, the overall stock market remains near record highs. A key reason is continued investor confidence that the U.S. economy is resilient enough to withstand the impact of tariffs while inflation stays relatively subdued.

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Still, there are technical signs that market momentum is weakening. Dan Greenhaus, chief strategist at Solus Alternative Asset Management, noted that fewer S&P 500 stocks are now trading above their 20-day and 50-day moving averages — a signal that the upward momentum may be faltering.

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However, Greenhaus believes the broader picture remains positive. "Inflation and economic data have generally exceeded expectations," he said, "and company outlooks have also been fairly strong. So I wouldn’t rely too heavily on technical signals at this point."

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Some argue that the market’s current calm — including the low readings on the so-called fear index (VIX) — might actually support further gains. Dave Lutz, equity sales trader and macro strategist at Jonestrading, referenced an old Wall Street saying: “Never short a dull market.” According to Lutz, history shows that when markets are quiet, they tend to drift higher.

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That said, for those investors waiting for a clear reason to re-enter the market, this earnings season hasn’t yet delivered that spark. While corporate results have generally been solid, stock reactions have been subdued. This lack of enthusiasm suggests that strong performance may already be fully priced in, especially with stock valuations sitting at elevated levels.

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Citigroup strategists agree that while the latest economic data lends support to bullish sentiment, most of the optimism is already embedded in share prices.

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"The problem is not with the fundamentals," said Scott Chronert, head of U.S. equity strategy at Citigroup. "It’s about timing. It feels like the market has already advanced in anticipation of future positive developments — possibly too far ahead of actual progress."

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