US stocks have hit their highest levels ever. Non-tech companies helped lift the S&P 500 to a record high, showing that investors are looking beyond just tech stocks. The S&P 500 rose 37 points to reach an all-time high of 6572. Top-performing stocks included MU, ABBV, GS, CAT, MMM, MS, LOW, HD, WMT, and GM. Many of these may gain from anticipated rate cuts, especially after a disappointing jobless claims report raised expectations for aggressive rate cuts by the Federal Reserve.

Market Optimism Amid Economic Worries

On the other hand, NFLX dropped by 2% following the exit of its chief product officer, known for supporting reality TV shows. Deutsche Bank raised its year-end target for the S&P 500 to 7000, showing optimism for ongoing growth. The S&P 500 has just set a new record, and the market suggests that bad economic news may actually benefit stocks. Last week, jobless claims rose to 245,000, the highest in three months. Traders quickly priced in over a 70% chance of a Fed rate cut this month. This indicates a strong appetite for risk, making bearish call options or call spreads on the broader index appealing. We are seeing money moving from tech stocks to cyclical sectors like financials and industrials, which have outperformed tech recently. With the VIX at its yearly lows around 13.5, buying options is currently cheap. This is a great time to buy calls on sector ETFs like XLF (Financials) or XLI (Industrials) to benefit from this shift. Stocks like Caterpillar and Goldman Sachs are doing well because they are sensitive to interest rates and positive economic outlooks. Traders who believe in this trend might consider buying individual call options on these strong stocks for more targeted exposure than an index option. A similar pattern was seen in late 2023 when expectations of a Fed pivot sparked rallies in these companies.

Strategies for Easing Market Opportunities

However, company-specific news can still negatively impact individual stocks, as seen with Netflix after its executive departure. This weakness in an otherwise strong market provides a chance for bearish bets, like buying put options on NFLX. It also serves as a reminder to hedge long portfolios by purchasing some out-of-the-money index puts, especially since volatility is currently inexpensive. With forecasts from Wall Street, like Deutsche Bank’s target of 7000 for the S&P 500, upward momentum is expected to continue into year-end. This supports using longer-dated call options, such as those expiring in December 2025 or January 2026, to take advantage of this potential movement. This strategy allows traders to stay bullish while managing their risk. Create your live VT Markets account and start trading now.

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