By Jacob Sonenshine

The spotlight may be on the fight between Donald Trump and Elon Musk, but what's more important for investors is that the S&P 500 got all the way to 6000 and couldn't keep climbing -- a telling, if nuanced, signal.

The index has gained 1.4% for the week, while the Dow Jones Industrial Average is rising 1% and the tech-heavy Nasdaq Composite is up 2.2%.

For the S&P 500, 6000 is key -- and the index hasn't passed the test with flying colors. It reached 5999 by noon on Thursday. Then sellers came in to knock it lower, not because of any negative news, just the impulse to take profits as they see risk that the market could drop. It was the third time since late February that the index came within less than 50 points of reaching 6000 and couldn't surpass it, indicating that not enough has changed in the economic environment to stoke confidence that stocks could soar from here.

Not even the better-than-expected May jobs report could send the index soaring meaningfully above the key level. The indexes closed in the green on Friday. The S&P 500 traded at just a few points above 6000, but stopped rising from there. It's still below its record high of 6144 hit on Feb. 19.

The 139,000 jobs added were less than the 147,000 in April and way down from a multiyear peak last year.

"There are clearly cracks forming and employment data is likely to show clearer signs of softening towards the end of summer," writes Seema Shah, chief global strategist at Principal Asset Management. "The market is clearly skittish about economic risks."

Yet the report was just strong enough that the probability of a Federal Reserve interest rate cut in July dropped 12 percentage points from Thursday, according to the CME Group. Rate cuts would help extend the economic expansion. Without them, markets will remain concerned about slowing growth.

Traders are hesitant to bid stocks much higher. The S&P 500 is already up 20% from its 2025 low hit in early April, erasing all of its losses from just before the day President Trump announced tariffs on U.S. trading partners. Essentially, the index is priced as if there aren't even any tariffs, which could have negative economic consequences.

What's more, if the S&P 500 rallies only a couple of percentage points to reclaim its record high, it would be 4% above its 20-day moving average. Given that it hasn't been more than about 2% above the average in the past year, that's worrisome. Unless such a move comes alongside a vastly improving economic outlook, buyers become gun-shy.

The S&P 500 is "into resistance at 6000 and overbought," says John Roque, head of technical strategy at 22V Research, who notes that the index is more likely to pull back from this level than to break out to new highs in the near term.

That's partly because tariffs, rolled back though they might be, are still part of the equation. They lift the cost of imports, and while the U.S. hasn't seen companies lift prices enough to bring inflation up to worrisome levels, it could be on the cusp of seeing such pricing reflected in inflation data.

Walmart, for example, said on its first-quarter earnings call in May that it might raise prices further later this year to fully offset higher costs from tariffs. That creates the unwanted kind -- not the healthy kind -- of inflation: price increases that aren't driven by rising consumer demand but by other factors. This reduces consumer demand, not only due to higher prices themselves but because it could keep interest rates higher.

Lower demand could ultimately force analysts to reduce estimates for companies' earnings, which would certainly pressure stock prices, which right now don't reflect much -- if any -- of this risk.

Our advice: Don't gorge on stocks at these levels.

Write to Jacob Sonenshine jacob.sonenshine@barrons.com

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June 06, 2025 13:01 ET (17:01 GMT)

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