Deutsche Bank strategists said the S&P 500 has recorded an eighth straight weekly gain, with lower oil prices easing fears of a stagflationary shock and providing support for bonds and equities on both sides of the Atlantic. After the long weekend, S&P 500 futures were up 0.62% and Nasdaq futures rose 0.85%, though they remained a few tenths of a percentage point below levels seen before overnight strikes.
The S&P 500 rose 0.88% over the week, marking its first run of eight consecutive weekly advances since 2023. The move came despite softness in major technology shares, as the Magnificent 7 fell 0.76% last week, snapping a streak of seven weekly gains. The article was produced using an artificial intelligence tool and reviewed by an editor.
Market Momentum Widening Beyond Technology
We are seeing the S&P 500 extend its winning streak for an eighth consecutive week, a positive sign for market momentum. This rally is heavily supported by the recent drop in WTI crude oil prices, which have fallen over 10% in the last month to trade near $74 a barrel. This decline eases inflation worries and supports the case for continued economic expansion.
The market’s advance is happening even as its former leaders, the big tech stocks, are beginning to falter. The Magnificent 7 group recently posted its first weekly loss after seven straight weeks of gains, suggesting a rotation is underway. We view this as a healthy broadening of the market, as other sectors are now participating in the rally.
Volatility, Options Strategies, and Sector Rotation
With the VIX volatility index hovering near multi-year lows around 12, options premiums are relatively cheap. This presents a prime opportunity to purchase protection against the clear weakness in the technology sector. We believe buying puts on the Nasdaq 100 or specific big tech names is a prudent way to hedge against further declines in that segment.
Simultaneously, we should maintain exposure to the broader market’s strength. Pairing Nasdaq puts with call options on the S&P 500 allows us to play this divergence. This strategy profits if the broader market continues to grind higher while the tech sector corrects, which is what current trends suggest.
This view is further supported by the latest CPI report, which showed inflation cooling to 3.1%, boosting sectors sensitive to interest rates like industrials and financials. We should therefore consider call options on sector ETFs like XLI and XLF to capture this rotational strength. Historically, such divergences between tech and the broader market signal a shift in leadership that can last for several months.
Given the eight-week rally, the market is technically overbought and could be due for a short-term pullback. Therefore, using defined-risk option strategies like call spreads on the S&P 500, rather than buying outright calls, could be a wise approach. This allows us to participate in the upside while capping potential losses if the market briefly pulls back.
