Sam Stovall

Stovall points to specific sub-industries that are participating in a broadening market rally. This is a technical momentum trade. These specific sectors have recently moved back above both their 50-day and 200-day moving averages. When price crosses above these averages, it often signals a shift from a downtrend to an uptrend and indicates healthy market breadth. 30 sub-industries moved above these key technical levels last week, with these three sectors explicitly named as leaders. A reversal in the broader market could cause these sectors to fall back below support levels.

Stovall expects the market to be supported by a potential Fed rate cut at the June meeting. The "bad news is good news" dynamic is in play. Stovall anticipates weak economic data—specifically a low payroll number (around 55k) and declining year-over-year CPI. This economic softening would pressure the Fed to cut rates, which lowers borrowing costs and typically boosts stock valuations. Expectations of Q4 GDP (cited between 4.2% and 5.4%) combined with anticipated declines in headline and core CPI. If inflation remains sticky or economic data comes in too hot, the Fed may delay rate cuts, hurting asset prices.