US MARKET CALL: Hanging Out At 7,500 And 4.50%

The S&P 500 has spent significant time trading near the 7,500 level since mid-May. While the index tracks its 50-day moving average, history suggests periods of sideways consolidation often precede pullbacks that draw in dip buyers. We expect this pattern to continue through September, keeping our year-end target at 8,250 intact. Investors should note that the market leadership is shifting. The Magnificent-7, which drove much of the recent bull market, has lost momentum while the S&P 493 carries the weight. Value stocks are currently outperforming growth, partly because expectations for growth-heavy sectors are high enough that simple performance appears underwhelming. Defensive sectors such as health care and consumer discretionary have seen significant gains since May, highlighting a rotation away from technology stocks that appear fatigued by recent AI-related hype. Semiconductor stocks have also faced corrections, with the SOXX index down over 20 percent from its June highs.

Earnings season results remain strong. Consensus Q2 EPS growth estimates reached 22.9 percent, with pro forma growth hitting 26 percent. Energy and financials are key contributors to these gains, with companies like Goldman Sachs and JPMorgan beating expectations significantly. While health care stock prices are high, actual earnings in that sector continue to lag. Despite some volatility, forward earnings and revenues are hitting record highs. The forward profit margin recently climbed to 16.1 percent, a sign that company efficiency remains high. Credit markets also show stability, with 10-year Treasury yields hovering around 4.50 percent, which fits the current range we view as normal. Corporate credit spreads remain tight, which keeps market volatility low even as investors monitor private credit concerns. We expect the market to broaden further as the year progresses.