What Happened in the Markets Last Week
Tech Stocks Rebound After Friday Selloff
The Nasdaq jumped 1.44% on Monday, recovering from Friday’s brutal 4.2% decline that marked its worst day since April 2025. Semiconductor stocks led the bounce with the SOXX ETF surging nearly 7% as investors bought the dip in beaten-down chip names.
Energy Dominates 2026 Stock Market Rally
Energy stocks have surged over 22% year-to-date, making it the clear market leader amid a 12% spike in oil prices and renewed geopolitical tensions. Meanwhile, technology has become the worst-performing sector, down roughly 3% as investors rotate away from expensive AI stocks.
Fed Rate Cut Hopes Fade Completely
Markets are pricing in over 95% odds of no rate change at the June 16-17 Fed meeting as inflation remains stubbornly high. April’s CPI reading of 3.8% year-over-year, driven by a 17.9% energy surge, has pushed the 10-year Treasury yield to 4.56%.
Marvell Joins S&P 500 Index
AI chipmaker Marvell Technology will join the S&P 500 on June 22, sending shares up 9% in premarket trading to $287.05. The semiconductor company’s addition reflects the continued importance of AI infrastructure despite broader tech sector weakness.
Utilities Draw Record Investor Inflows
The Utilities sector ETF (XLU) attracted $694 million in Q1 2026 inflows as investors sought defensive plays. This defensive rotation came as the Technology sector ETF (XLK) faced outflows of $476 million amid concerns over stretched AI valuations.
S&P 500 Weekly Outlook
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Bull Case: What Could Drive the S&P 500 Higher
🏢 Breadth Resilience
Despite the 2.6% decline, nearly half of S&P components finished green, showing underlying strength beyond megacaps. This broad participation suggests the selloff may be more technical than fundamental, creating opportunity for rotation plays.
💼 Employment Strength
May’s 172,000 jobs added roughly doubled expectations, reinforcing economic resilience. Strong labor markets historically support equity valuations even as they complicate Fed policy, potentially justifying current multiples if growth continues.
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Bear Case: Risks That Could Weigh on the S&P 500
📉 Technical Breakdown Risk
The break of the 9-week winning streak with 2.6% losses suggests momentum has shifted, and RSI shows negative divergence. A failure to hold 7,300 support could trigger stops toward the psychologically important 7,000 level.
😰 Volatility Spike
VIX closing above 21 with a 34% single-day surge indicates institutional hedging demand. This fear gauge breakout often precedes further downside as option dealers adjust hedges, creating negative gamma feedback loops.
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Key Market Markers
📊 7,300 Support Test
Friday’s close at 7,383 held above this key technical level that attracted buyers in May. A decisive break below 7,300 targets the 7,000 psychological support, while a bounce confirms the level as a floor for further upside.
💰 10-Year at 4.54%
Treasury yields rose 6bp post-jobs data, with the 10-year now challenging recent highs. A break above 4.60% could pressure equity valuations, while any retreat below 4.40% might signal Fed pivot hopes.
🎯 VIX Above 21
The fear gauge’s 34% spike to close above 21 broke its recent 15-20 range, signaling institutional concern. Sustained readings above 20 often coincide with 5-10% equity corrections, making this a key level to monitor.
📈 7,700 Bull Target
Despite the selloff, technical analysts maintain the 7,700 upside objective based on chart patterns. This represents 4.3% upside from current levels and remains achievable with supportive Fed messaging or economic data.
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Bottom Line
The market faces a critical inflection point with the Fed meeting coinciding with technical support tests and elevated volatility. Bulls can point to employment strength, broad market participation, and intact upside targets, while bears see policy uncertainty, momentum breakdown, and fear gauge warnings. The 7,300 level and Fed communications will likely determine whether this represents a healthy pullback in an ongoing bull market or the start of a deeper correction. Traders should prepare for heightened volatility through the FOMC decision, with clear directional signals likely emerging post-meeting.
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