Wall Street Momentum Surges, But Caution Builds Ahead of Next Trading Session

U.S. Jobs Data Fuels Market Confidence

The U.S. stock market closed the week on a strong note, with the S&P 500 climbing 1.5% to 5,686.67 on May 2 — marking its longest winning streak since 2004. This nine-day rally was powered by robust April employment data, which showed 177,000 new jobs added and an unemployment rate holding steady at 4.2%. These figures reinforced optimism around the strength of the U.S. economy, even amid renewed concerns over tariffs and global trade tensions.

Investors are betting that solid earnings and a resilient labor market will support continued growth, offsetting fears that the Federal Reserve may keep interest rates elevated longer than previously anticipated. Analysts from CFRA have expressed confidence that equities may push higher in the near term, with broad-based gains across sectors, especially in industrials and technology.

The strong close came despite rising oil supply concerns. Crude prices dropped sharply, with West Texas Intermediate falling to $56 per barrel. The OPEC+ alliance’s move to boost output and waning Chinese demand both contributed to the downturn, further alleviating inflationary pressures. For more on this development, MarketWatch provides in-depth energy sector coverage.

Technical Warning Signs and Historical Trends Raise Red Flags

While market momentum remains bullish, several analysts are urging caution heading into the next trading session on May 5. BNP Paribas has highlighted that even without a recession, the S&P 500 historically tends to experience pullbacks, projecting potential downside of up to 19% from current levels. Their view is echoed by a recent Business Insider analysis, which examined 100 years of data showing that markets often correct sharply after extended rallies.

Technical indicators are also sounding alarms. The Relative Strength Index (RSI) on the S&P 500 has been diverging since March, a classic signal of possible trend exhaustion. According to IG’s technical outlook, this divergence may hint at an incoming reversal.

Seasonality is another factor to watch. The adage “Sell in May and go away” looms large, as historical data suggests the market tends to underperform in the summer months. Bloomberg recently warned that despite the current rebound, May could test investor optimism as earnings season winds down and macroeconomic concerns resurface.

Looking ahead, markets will be influenced by progress in U.S.–China trade negotiations, upcoming corporate earnings, and any shifts in Fed policy language. While the rally has been impressive, market participants should brace for possible turbulence in the days ahead.

As Wall Street moves into a potentially volatile phase, cautious optimism will likely define investor sentiment entering the new week.