Can The Stock Market Run Through 6000

* Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

DJIA 52-wk: +10.22% | YTD: +0.51% | Wkly: +1.17%

S&P 500 52-wk: +12.22% | YTD: +2.02% | Wkly: +1.50%

NASDAQ 52-wk: +13.99% | YTD: +1.13% | Wkly: +2.18%

TESLA 52-wk: +65.88% | YTD: -26.92% | Wkly: -14.81%

Sector Highlights

• Steel Industry: U.S. steelmakers rallied after President Trump announced a decision to double tariffs on steel and aluminum to 50%. Cleveland-Cliffs' share price jumped 23%, while Steel Dynamics and Nucor each saw a 10% increase. wsj.com
• Retail: Discount retailers benefited from higher-income consumers seeking value. Dollar General's stock surged 16%. wsj.com
• Technology: Palantir Technologies led S&P 500 gains, climbing 6.5% due to positive sentiment around its government business and AI growth. investopedia.com

Notable Declines

• Tesla: Shares plummeted 14% on Thursday, wiping out approximately $152.4 billion in market value, amid escalating tensions between President Trump and CEO Elon Musk. wsj.com
• Lululemon Athletica: Shares fell 19.8% after issuing disappointing sales and profit guidance, citing cautious consumer spending and impending price hikes. investopedia.com

Economic Data

• Jobs Report: U.S. employers added 139,000 jobs in May, showcasing resilience amid uncertainty over President Donald Trump's trade policies. apnews.com
• Inflation: The Personal Consumption Expenditures (PCE) price index rose 0.1% in April from the prior month and 2.1% on a year-over-year basis, indicating a slowdown in inflation. ajg.com

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 SPX+1.03% 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 DJIA+1.05% is rising 1% and the tech-heavy Nasdaq Composite COMP+1.20% 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 worrying. 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.

Is it time to bust some myths? Last week the Russell 2000 was +3.2%, closing at 2,132.25

Let me start with some light trash-talking before moving on to suspect stock picks. I realize I’m not drumming up enthusiasm here, but in my defense, the topic is small-caps. It’s an asset class so perennially disappointing that mutual fund reports should come with sympathy cards. The Russell 2000 small-cap index should be renamed the Don’t Do It. I’d rather diversify into betting pickleball on FanDuel.

OK, I took that too far. Technically, small-caps have been long-term winners—so long as the timeline stretches back to the investing ice age. Over the past century, small company U.S. stocks returned an average of 15% a year, versus 12% for large companies. This didn’t go unnoticed. A Swiss engineer named Rolf Banz documented the “size effect” while studying business at the University of Chicago. His landmark paper was published in the Journal of Financial Economics in 1981.

Ironically, that year turns out to have been a pivotal one for the biggest U.S. company. It’s when IBM IBM+0.75%, then a maker of mainframes and typewriters, began taking orders for a side project that became a surprise hit called the Personal Computer. For a quick and dirty operating system, it had turned to Harvard dropout Bill Gates and his 31-person programming outfit Microsoft MSFT+0.58%, which paid $75,000 for a piece of test software known as QDOS, or, well, quick and dirty operating system. IBM rebranded it PC-DOS, but didn’t lock down the rights, leaving Microsoft free to sell it as MS-DOS to makers of PC clones. Within five years, IBM had smothered its PC development in bureaucracy, resulting in the loathed PCjr, which wasn’t powerful enough to run Microsoft’s latest software revelation, called Windows. Goldman Sachs took Microsoft public in 1986 at a price that gave it a market cap of $777 million, or $2.3 billion in today’s dollars.

Investors since have enjoyed wild stock surges from personal computing, then the internet, now artificial intelligence. Microsoft is valued at $3.5 trillion, a smidgen more than Nvidia NVDA+1.24%. Tech giants dominate the stock market. Banz’s size effect seems like the stuff of history lectures. Sure, once in a while some brave soul argues we’re due for a small-cap comeback. Northern Trust analyst Daniel Fang points out that small-caps have underperformed large-caps for 12 years, leaving them cheap, and that such cycles since 1930 have averaged nine years in either direction. Easy money led big companies to gobble up small ones before they could mature, but with interest rates higher, more small-caps will naturally grow to become large-caps, boosting returns for small-cap indexes, argues Fang.

The counterargument is that companies are staying private for longer, so today’s small-caps are a scraggly bunch. Compared with the 1990s and early 2000s, today’s Russell 2000 companies are twice as old with barely half of the projected earnings growth. Also, AI’s rise favors giants. Right?

Bank of America Securities Securities recently published a quantitative small-cap tell-all, complete with myth-busting. Some of its findings are surprising. The strongest predictor of small-cap returns is valuations, and today’s discount to large-caps is the widest in 30 years. There is a big difference in quality between the Russell 2000, where more than a third of companies aren’t profitable, and the S&P SmallCap 600, with 9% unprofitables companies. That can affect performance. Over the past decade, investors have made 108% in Vanguard S&P Small-Cap 600 VIOO+1.30% exchange-traded fund, versus 90% in iShares Russell 2000 IWM+1.62% ETF (and 236% in the large-cap SPDR S&P 500 ETF). These things, maybe you already knew.

But did you know that free cash flow and dividends have been better predictors of small-cap performance than earnings growth rates? Or that small-caps have historically outperformed during stagflation? Did you know that despite talk of undiscovered gems, small-caps with broad analyst coverage have performed best? Or that more companies are graduating from the Russell 2000 to the large-cap 1000 than the other way around, a reversal from recent years? Or that a falling percentage of small-cap initial public offerings have negative earnings? Or that the rate of AI mentions in small-cap earnings calls is rising?

Bank of America Securities takes all of this to mean that small-cap quality has bottomed and begun to improve, and that AI can pay off for small companies, too. In the debate between “small-caps are due” and “small-caps are dead,” the bank reckons the truth is somewhere in the middle, and that small-caps are a good diversifier, with better stock-picking opportunities than large-caps.

Like-minded investors can buy the aforementioned Vanguard fund, or a value-tilted sibling, Vanguard S&P Small-Cap 600 Value. For an active fund, Morningstar gives top marks to Boston Trust Walden Small Cap, but the fee is 1% a year, and the minimum investment is $100,000.

Or search for your own small-caps. I recently fired up the PCjr, added fresh diesel to the dial-up modem, and screened the S&P SmallCap 600 index for dividend yields of 1% to 5%, with plenty of free cash flow.

Muscatine, Iowa’s HNI makes office furniture and fireplaces for houses. Revenue is rising, and Benchmark Securities says years of end-market underinvestment are a growth opportunity, and that HNI has improved its cost structure, so peak earnings are likely to be higher in the next upswing. The dividend yield is 2.9%.

Piper Sandler, a Minneapolis investment bank, reported record first-quarter revenue on a surge in advisory services. Shares have returned 340% over the past five years. Regular dividends make for only a 1% yield, but the company tends to start each year with a special dividend, and factoring in its latest brings the yield to 2.2%.

Dana, yielding 2.4%, makes driveline components including axles and electric motors for light vehicles and big rigs. It’s selling a unit focused on construction machines, and new CEO R. Bruce McDonald says he will reduce leverage. “This is a transformational opportunity for Dana to move out of, I’d say, the trailer park into the top neighborhood of automotive suppliers,” he said recently at a conference. RBC Capital just upgraded the stock to Outperform from Sector Perform.

1) Monday: Apple’s Worldwide Developers Conference

2) Wednesday: CPI, which is usually one of the most volatile trading sessions

3) Friday: University of Michigan consumer sentiment index

It should be a very volatile week especially if the market tests 6000 again. I’m keeping a close eye on the small cap names for a potential breakout.

Russell 2000 = the index (benchmark of small-cap stocks).

IWM = the ETF that investors can trade to gain exposure to the Russell 2000.

NOTE: I don’t care about the Trump/Musk feud.

— Richie

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