A fragile stock rally is starting to show signs of broadening out, suggesting there could be opportunity for investors in the market beyond artificial intelligence alone. The S & P 500 on an equal weight basis hit all-time highs on Tuesday. The index rose as hopes of a ceasefire in Iran tempered the price of oil and rising Treasury yields, and lifted parts of the market that were most under pressure from the conflict. The index was last near 8,395, close to a record, after falling to roughly 7,600 at the March lows. The broadening out of the rally should continue, as earnings and technicals turn constructive, investors hope. The Magnificent Seven companies and the rest of the S & P 500 companies just reported their fastest profit growth since 2021, according to FactSet senior earnings analyst John Butters. The improving technical setup in the S & P 500 Equal Weighted Index could help the measure hit at least 9,000, roughly 7% above where the index closed Tuesday, according to Adam Turnquist, chief technical strategist at LPL Financial. RSP YTD mountain Invesco S & P 500 Equal Weight ETF, YTD It’s an encouraging sign for the bull market, as a heavy reliance on just a handful of AI-related names was in large part why investors stayed skeptical of the comeback rally in April and May. A broadening out suggests the bull market is more sustainable than feared. It also gives investors more places, apart from technology, to allocate their capital, especially with more names looking cheap after coming under pressure. Stocks that may have been overly punished include consumer discretionary, now the third-worst performing sector this year as pricing pressures grow. “There [are] pockets of the market that are actually — from a risk-reward perspective — much more attractive,” said Mark Hackett, chief market strategist at Nationwide’s investment management group. “If you’re kind of creative, you can do probably better than what I’m expecting for the overall market.” Such optimism doesn’t necessarily translate into much more upside for the market cap-weighted S & P 500 , especially after its recent gains. Many investors expect that the broad market index could be due for a period of consolidation after rallying 16% in two months. But it does suggest the next leg of the bull rally could be more sustainable, and that stock pickers could have a more rewarding time choosing winners in the market. “I just think you’ve gotten most of what you’re going to get” from the S & P 500, Hackett added.
