Large, sophisticated investors now appear to be embracing the rally in U.S. stocks, as the S&P 500 attempts to remain above 6,000 in a rise toward its record high notched in February.

"Institutional investors are, believe it or not, quite bullish right now," DataTrek Research co-founder Nicholas Colas said in a note emailed Monday. "State Street's Institutional Investor Risk Appetite index shows that the 'Big Money' is only now embracing the recent rally, which suggests a further 'melt up' move higher into quarter end."

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"Institutional investors were reducing risk from March through mid-May 2025, their longest bout of de-risking since September - December 2023," Colas said. "Risk appetites are verging on levels consistent with a near term top," he said. "This could certainly come later in June."

The S&P 500 index SPX ended Friday at 6,000.36, the highest level since February and just 2.3% below its record closing high, which was reached Feb. 19, according to Dow Jones Market Data.

A melt up risks happening when investors sharply accelerate the market's climb in what appears to be an unsustainable way. This may happen after a wave of investors buys stocks on fear they have missed out on the rally, with the potential for a market letdown afterward.

"The S&P 500 is back to 6,000, which means it trades for 22.7x consensus 2025 earnings estimates ($264/share)," wrote Colas. "To own U.S. large caps here, one must believe multiples will increase further."

The S&P 500 index was edging higher early afternoon Monday, after back-to-back weekly gains.

Consensus earnings estimates for the S&P 500 typically "almost always decline through a year unless the U.S. economy is coming out of a recession," according to DataTrek. "That's not the case now, so the S&P will only get more 'expensive' as the year goes on, even if it goes nowhere for the next few months."

The S&P 500 saw a strong rebound in May after being rocked by tariff worries. The U.S. stock-market index is now back in positive territory for 2025, even as trade-policy uncertainty persists, with a year-to-date gain of around 2% based on Monday afternoon trading levels, according to FactSet data, at last check.

"Institutional investors have been risk-wary until very recently, even with a global equity rally that is now fully 2 months old, and they clearly ended May in catch-up mode to correct for that unnecessary caution," said Colas.

With peaks in State Street's risk-appetite index tending to coincide with "near-term tops" for the S&P 500, he looked for evidence of such cases in the current rally, which began in the fourth quarter of 2022.

"Such was the case in July 2023, July 2024, and January - February 2025," Colas found. "The only exception was in the run up to the 2024 U.S. general election (in October of that year)."

The U.S. stock market was trading mostly higher early afternoon Monday, with the S&P 500 up 0.1%, the technology-heavy Nasdaq Composite COMP gaining 0.3% and the Dow Jones Industrial Average DJIA trading about flat, according to FactSet data, at last check.