S&P 500 was turned back at the 6,400 level this week. What could come next
After a perfect week last week, when the S & P 500 finished above 6,300 for the first time ever and scored five closing highs in a row , the broad market index’s momentum has hit a wall. Stocks attempted to close above 6,400 a few times this week, but even upbeat quarterly results from market leaders like Microsoft and Apple couldn’t make it happen. “Like a 5th-grader trying to eke out one more pull-up in gym class, the SPX cannot get past 6,400 no matter how hard it tries,” Wells Fargo analyst Christopher Harvey wrote in a note on Friday. The market sold off in a big way on Friday, its fourth consecutive day of losses, reacting first to President Donald Trump signing executive orders Thursday imposing “reciprocal” tariffs on several countries. The duties now range from 10% to 41%. Stocks were then hit further by a July nonfarm payrolls report Friday that showed the labor market has been weakening for months, according to Bureau of Labor Statistics. Trump later Friday fired BLS commissioner , Erika McEntarfer, in the wake of the report. Friday’s more than 1.6% move lower in the S & P 500 confirmed its failure to top the 6,400 mark this week and put its year-to-date rise at 6.1%. The market’s short-term performance, however, is more impressive, with the S & P 500 climbing 11.3% in just the past three months. .SPX 3M mountain S & P 500 over the past 3 months. From the closing low on April 8 – days after Trump unveiled steep new tariff rates that were later delayed – to its all-time closing high this past Monday, the index has risen nearly 28%. Frank Cappelleri, founder of CappThesis, thinks the rally, over a “relatively short period,” means stocks are “bound to face some digestion.” “From a technical standpoint, the S & P 500 had been taking advantage of a series of bullish transformations since April, and that momentum now needs time to consolidate before the next leg higher,” he said. “This pause could be healthy. It also coincides with the typical seasonal softness that tends to show up in early August, making it understandable for the market to take a breather here.” Additionally, there has been a lack of substantial moves in either direction on the S & P 500 prior to Friday’s session, another reason behind the index’s inability to rise above 6,400, according to Andrew Thrasher, founder of Thrasher Analytics. “The market had experienced very few 1% up or down days, and when that occurs it sets up for the potential of market volatility to return when we do experience a 1% up or down day,” he told CNBC. That and the seasonal weakness historically seen in August and September, mean that the latest sell-off in the S & P 500 is coming after “narrow internal breadth” at its recent peak, said Ari Wald of Oppenheimer. The percentage of stocks trading above their 200-day average on the Russell 3000 only reached 59% compared to readings of 70% throughout 2024, revealing that strength in the cap-weighted S & P 500 was “masking weakness underneath the surface,” he said. “Sure enough, those relatively weak areas like small-caps and value stocks have weighed on the market overall this week,” Wald, the firm’s head of technical analysis, said. The S & P 500 may come under further pressure from here, as a reset to 5,900 is “reasonable at a minimum” based on current market conditions, Wald added. That would equal roughly 5% downside potential from Friday’s closing price. “We believe tactical conditions have become unfavorable,” Wald continued. “We’re looking for seasonal consolidation to continue to develop through the balance of Q3. While we recommend maintaining a long-term core position in large-caps and growth, we see vulnerability in small-caps and value over the near-term.”
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