(Bloomberg) — Wall Street’s rebound failed to gain traction as a rally that drove stocks to all-time highs keeps showing signs of exhaustion.
It’s been more than five months since the S&P 500 suffered back-to-back declines of at least 1%. The market ebullience saw the index notching almost 30 records in 2025, eclipsing the average year-end analyst forecast and spurring calls for consolidation.
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At Bank of America Corp., Savita Subramanian notes that on 19 of 20 metrics, the US equity benchmark is trading at statistically expensive levels.
“Timeout called,” said Craig Johnson at Piper Sandler. “The trend of strong gains isn’t over yet; however, the short-term risk-reward profile is becoming more compressed as stocks extend higher while underlying momentum fades.”
Bullish investors should keep hedging their portfolios as more and more people chase this year’s stock-market rally, according to Nomura Securities International Inc.’s Charlie McElligott.
Euphoria over AI has turned skeptics into equity buyers at higher levels. This behavior alongside many players at or near maximum exposure has built up downside risk in stocks, he said.
The S&P 500 erased earlier gains. Micron Technology Inc., which has almost doubled this year, fell despite an upbeat forecast. Treasury yields edged up alongside the dollar.
Despite the lack of strength on Wednesday, the stock market is holding near its record. That’s been underpinned by the belief that the economy is not falling off a cliff and growth will be bolstered by improving corporate profits and the artificial-intelligence boom.
Subramanian at BofA notes that the S&P 500’s multiple may be warranted given better visibility/predictability.
“In theory, investors pay up for predictable assets and are compensated for uncertainty. Perhaps we should anchor to today’s multiples as the ‘new normal’ rather than expecting mean reversion to a bygone era.”
At JPMorgan Chase & Co., Andrew Tyler said “several conversations yesterday focused on what could derail this bullish run. My favorite response was an asteroid hitting the earth.”
Following a nearly 35% rally from the April lows, even Federal Reserve Chair Jerome Powell noted this week that equity prices are “fairly highly valued.”
To Mark Hackett at Nationwide, that comment appeared observational rather than cautionary. Nonetheless, we could see a period of consolidation in the near term.
“That said, sentiment and positioning indicators suggest the rally is underpinned by cautious optimism rather than speculative excess,” Hackett noted. “This positioning and sentiment backdrop supports a constructive outlook for equities.”
Of course, risks abound, from sticky inflation to the expansion of the US job market moderating.
While Powell keeps pointing to a cooling labor market to explain why officials lowered rates last week, he’s also signaling the central bank remains vigilant on inflation as tariffs continue to work through the economy.
“The stagflation issue keeps popping its head up every few months,” said Matt Maley at Miller Tabak.
Whether Friday’s key price data adds to stagflation fears — or minimizes them — should be important for how the market acts as we move into the month of October, he said.
Meantime, Treasury Secretary Scott Bessent expressed disappointment that Powell hasn’t clearly established an agenda for cutting interest rates.
“Rates are too restrictive, they need to come down,” Bessent told Maria Bartiromo in an interview on Fox Business Wednesday morning. “I’m a bit surprised that the chair hasn’t signaled that we have a destination before the end of the year of at least 100 to 150 basis points.”
Corporate Highlights:
Micron Technology Inc., the largest US maker of computer memory chips, gave an upbeat forecast for the current quarter, helped by demand for artificial intelligence equipment. Oracle Corp. is seeking to borrow $15 billion from the US investment-grade bond market on Wednesday, as the software maker ramps up its spending to meet the needs of the AI boom. Microsoft Corp. will start using artificial intelligence models from Anthropic to help power its workplace AI assistant, adding a significant partner to a product that has so far been predominantly driven by OpenAI. Alibaba Group Holding Ltd. unveiled plans to ramp up AI spending past an original $50 billion-plus target, joining tech leaders pledging ever-greater sums toward a global race for technological breakthroughs. Amazon.com Inc. was upgraded to overweight at Wells Fargo on greater conviction in the company’s Amazon Web Services division. Adobe Inc. was cut to equal-weight at Morgan Stanley on decelerating digital media annual recurring revenue. SAP SE will work with OpenAI to bring the artificial intelligence company’s services, including ChatGPT, to Germany’s public sector. Charles Schwab Corp. wants to give its retail investors more opportunities to take stakes in private companies as a growing number of firms become industry giants before going public, Chief Executive Officer Rick Wurster said. Tether Holdings SA, issuer of the world’s largest stablecoin, is in talks with investors to raise as much as $20 billion, a deal that could propel the crypto firm into the highest ranks of the world’s most valuable private companies. The US is seeking an equity stake in Lithium Americas Corp. as it renegotiates terms of a $2.3 billion Energy Department loan, according to people familiar with the matter. Freeport McMoRan Inc. said force majeure was declared on contracted supplies from its giant Grasberg mine in Indonesia. Spirit Aviation Holdings Inc. signed a tentative deal with its biggest aircraft lessor to give back planes it is not flying, reduce an order it previously placed for new aircraft and collect cash the bankrupt airline can use to reorganize. Defense stocks rallied in Europe and Asia after President Donald Trump said NATO nations should shoot down Russian aircraft that violated their airspace and struck a more sympathetic tone on Ukraine’s chances of winning the war. Iberdrola SA plans to invest about €58 billion ($68 billion) in mainly its UK and US power networks as the Spanish utility bets that its grid business will provide higher growth in the coming years than power plants. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.4% as of 1 p.m. New York time The Nasdaq 100 fell 0.6% The Dow Jones Industrial Average fell 0.3% The MSCI World Index fell 0.5% Bloomberg Magnificent 7 Total Return Index fell 0.2% The Russell 2000 Index fell 0.5% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.7% to $1.1733 The British pound fell 0.6% to $1.3443 The Japanese yen fell 0.8% to 148.76 per dollar Cryptocurrencies
Bitcoin rose 1.6% to $113,795.83 Ether was little changed at $4,175.71 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.14% Germany’s 10-year yield was little changed at 2.75% Britain’s 10-year yield declined one basis point to 4.67% The yield on 2-year Treasuries advanced one basis point to 3.60% The yield on 30-year Treasuries advanced three basis points to 4.75% Commodities
West Texas Intermediate crude rose 2.2% to $64.80 a barrel Spot gold fell 0.7% to $3,737.17 an ounce ©2025 Bloomberg L.P.