Market Highs and Sector Shifts: Analyzing the S&P 500 and Nasdaq Trends

The S&P 500 and the Nasdaq hit all-time highs on Friday, and interestingly, the best performing stocks since February is Dollar General, up around 50%.

And it is not an outlier.

Dollar Tree ranks 13th in the S&P 500 with a 30% gain, and these companies are the opposite of the growth stocks investors have been favoring lately.

Meanwhile, the mag 7 names, including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla had a massive drop after February, with 4 of them falling over 30%.

So where do we go as we see new?

Eyes for some of these names.

Well, joining me as we kick off the final trading session of June is Chris Versace, CIO of Tabatica Research.

Good morning to you and happy Monday, Chris.

First and foremost, let's talk about where we are, given that we're about to head into the second half.

So Q2 turned out to be quite the volatile year.

So what do you make of the highs that we're seeing for some of the major stock averages?

Well, Remy, I think if we dial it back to what we saw in early April with Trump's liberation day and the wave, multiple waves of uncertainty that have at the time washed into the market, really pushing the market considerably lower.

I think we've recovered and then some over the last several weeks given the prospect for trade deals, potential progress on Trump's big beautiful bill and candidly earnings holding up better than a lot of people expected.

Unfortunately, Remy, as we get ready to close out the quarter, it also means that despite this, you know, tremendous snapback which has, you know, done wonders for the market and returns, it also means the S&P 500 and the Nasdaq Composite are back in overbought territory.

Yeah, and speaking of which, last week we saw a lot of major names across sectors hit new record highs, and Nvidia rebounded 67%, hitting all-time highs last week.

So we're keeping an eye on obviously the mag 7, but the tech sector is also higher and only one of the top 10 S&P 500 techs.

From last year to February made it back into the top 10, and that is Palanttier thanks to a defense boom and obviously we know there are a lot of things going on in the world and given that we're paying attention to not just defense but also industrials as well, what is your outlook for different sectors within the S&P 500 as we head into Q3?

Well, you know, typically tech tends to be seasonally stronger in the second half of the year, and I think the strength that we've seen can continue to some extent it's going to hinge on what we hear about capital spending levels from big tech during the June quarter earnings season.

I wouldn't be surprised from me if they see, um, you know, continued strength for AI adoption, and that forces them to, you know, boost their capital spending plans in the second half of the year.

That in turn should be very positive.

For key chip stocks like Nvidia but Marvel and several others, you know, we're also today, tomorrow, sorry, going to get the May construction spending report and I think folks will be, you know, pleasantly surprised by that.

If you think about, you know, the amount of construction that we're seeing for various manufacturing infrastructure but also data.

Center, I think the nonresidential construction numbers in that report could surprise to the upside as we get more, you know, construction friendly weather.

That would be a boon for names like, you know, Caterpillar, United Rentals, even Eaton.

So I think there's going to be a lot of positive news coming, but Remy, I think ultimately to see the market move demonstrably higher, we're going to need to understand.

What gets passed in Trump's fiscal bill, as well as what are those 10 upcoming trade deals that Luckn was talking about?

Could there be some room for disappointment?

Maybe no Canada, maybe no China.

We'll have to see.

Yeah, and of course when it comes to the trade negotiations, that is also a wait and see thing for all of us.

But finally, before I let you go, it is a holiday short week here in the US we do get jobs figures all throughout the week and at the end of the week on Thursday morning, we get non-foreign payrolls, but Trump did call for lower interest rates and is. considering naming his pick to replace Fed Chair Powell and Fed officials Waller Bauman also suggesting a rate cut could come as soon as July.

The US money markets currently price only a 20% chance of a July reduction.

So what's on your forecasts when it comes to the jobs figures, including non-arm payrolls, and how many rate cuts do you expect to see in the second half?

So Remy, we're going to be watching what ADP has to say on Wednesday in terms of jobs being created.

The figure is expected to bounce back from that dismal report that we saw in May.

But you know, if you look at the June employment report, the expectation is we'll see slower job creation around 110,000 jobs, which is still a good figure.

It's not really falling off a cliff that would spur the Fed into action.

And as a result, I think what could be more important.

Is the inflation data that we get in ISM's manufacturing and services PMIs, the flash June PMI number from S&P Global pointed to a large increase in input costs and output costs in June.

If the ISM data shows that and we get, you know, relatively good job growth, I think the market's going to, you know, get rid of that July rate cut expectation even though it's already small and They'll start to focus on September.

Currently, I think we see maybe 2, maybe even 1 rate cuts, but we're going to get a lot more data, Remy, before the Fed September policy meeting.

If inflation ticks up, jobs remain, you know, healthy, that number of cuts could go from 2 to 1.

OK, Chris, well, we will have to leave it there but thank you so much for joining us on this Monday morning and have a very happy 4th of July weekend.

You too, Remy.