By Jacob Sonenshine

Regardless of all of the market's worries, the S&P 500 is near breaking through to a new record high.

The market benchmark was up Wednesday after having gained for the first two days of the week. It has rebounded, and then some, from a steep drop in April, when President Donald Trump announced high tariffs on trading partners.

The index is now up 4% this year, as the market is making a few key assumptions. The first is that the White House won't implement the worst-case scenario in terms of tariffs; many have been rolled back. The resulting lower-than-expected inflation could enable the Federal Reserve to cut interest rates, so the U.S. economy and corporate earnings can continue to grow.

All that has landed the S&P 500 at just over 6100 in recent trading. It needs a rally of less than 1% from here to reclaim its record closing level of 6144, hit in late February. If it breaks above that level, that could convince many on Wall Street that the index remains in a bull market, creating more upward momentum.

A stock or an index breaking above a key level, on its own, is a bullish signal. It means more buyers are coming in compared with the last time it hit that level -- often because something in the outlook for the economy and market has changed for the better. If the S&P 500 breaks out to new highs, it would indicate that new buyers are coming in because traders are confident in the market outlook, and that they see a greater probability that companies will continue to meet earnings expectations.

In fact, when the S&P 500 hits a fresh record after at least 60 days from its previous high, it goes on to see gains in the following 12 months in the vast majority of instances, according to LPL Financial. Many of those gains are in the double-digits in percent terms, and a few are above 20%.

History could repeat itself this time around if the index hits that new high. Analysts currently forecast low-double-digit annual earnings growth (in percent terms) for S&P 500 companies, in aggregate, for the next couple of years, according to FactSet. Buying momentum has been picking up any time the market sees evidence that companies are likely to hit those estimates, bolstering optimism among technicians that the index is ready to post continued gains.

"Momentum often begets momentum," writes LPL's chief technical strategist, Adam Turnquist. "A close above 6,144 would validate a breakout to new highs."

Also helping that case, a broader range of stocks have recently begun to participate in the rally. That's a positive sign because when a rally is built on just a few stocks, it means if those names falter, the index will, too. It could also mean the market has questions about the many industries that aren't seeing gains.

But the past two days have included gains for at least 75% of the index's constituents -- another signal that the market is feeling better about the economy and a variety of industries.

"The two straight big advances are catching the headlines, but it's much more important that the SPX now has had two consecutive trading sessions with at least 75% advancing stocks," writes Cappthesis' Frank Cappelleri, who pegs the 6555 level as a possibility for the S&P 500 in the near term.

The market is showing signs of life. Investors should hold on for more gains.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 25, 2025 11:44 ET (15:44 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.