Welcome back, animal spirits. The mood on Wall Street has brightened a lot of late, helped this week by the Fed holding the line on interest rates on Wednesday for the first time since March 2022. There also were some decent economic numbers, such as signs of declining inflation in May reported on Tuesday and Wednesday, and a decent retail sales report that came out Thursday. That led the S & P 500 rally to broaden out to lagging sectors, such as industrials and materials stocks, pushing the index past the 4,300 level that had held it back for the past year, igniting enthusiasm for stocks and leading the index to end the week above 4,400 . For now, it’s not a brighter economic picture or an exuberant earnings outlook pushing stocks higher. It’s momentum and fear of missing out on further gains. Strength begets strength, in other words. Another reason that some investors have come back to stocks is simply because the S & P 500 ended the week more than 23% above last October’s low. “History says the market tends to continue to run,” said Sam Stovall, chief investment strategist at CFRA Research. “The next level of resistance is above 4,500 on the S & P. Historically, the market gains 14.5% on average between the 20% threshold level and the next decline of 5% or more. And that usually happened over a five-month period. So I think, you know, this is a bit of a FOMO kind of a move.” Dot com parallels The latest stock market exuberance — fueled by all things related to artificial intelligence — even inspired some gurus to draw parallels with the late Clinton years’ dot com bubble. “Echoes of ’99?,” asked Wells Fargo head of equity strategy Chris Harvey in a Friday report that channeled Prince and was entitled “Party Like It’s 1999.” “We fear the Fed’s rate pause will allow uber-cap AI to go ‘next level,'” Harvey wrote. “If 1999/2000 is any guide, ‘new economy’ stocks will not fade until the economy and ‘old economy’ stocks do — which may not happen until the Fed takes rates to 6%+. We believe Fed’s action supports an intermediate rally in uber-caps, whose valuations are not outrageous vs. the SPX (and vs. 1999). Near-term overbought technicals imply a pause/pullback for the uber-caps, with a catch-up trade in” small- to mid-cap stocks. As if to illustrate the 1999/2000 parallel, Microsoft on Friday touched an all-time high, ending the week with a 2023 gain of more than 43% and a market capitalization approaching $2.6 trillion. Others are inspired by what they expect will be further gains in the fight against inflation, and a belief that the Fed won’t dare, or won’t need to, lift the fed funds rate above the current 5.00-5.25%. “Inflation is currently plummeting,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management in New York. “Inflation peaked in June of last year and has been rapidly declining over the past 12 months. We forecast that the June data for Consumer Price Index and Producer Price Index will come in at approximately 3% and 0%, respectively. PPI is a leading indicator of inflation, and the fact it is going to fall to near zero should be a major warning sign for the Fed that it has tightened too far and too fast,” he said. Next week is a holiday-shortened, four-day trading span in the late June vacuum before second-quarter earnings start spilling out in July. FedEx reports its results on Tuesday, Darden Restaurants on Thursday and CarMax on Friday, the same day the June purchasing managers’ service and manufacturing indexes are released. No bull trap Or, as Stovall said, there’s nothing on the immediate horizon “likely to lead to a bull trap, meaning that this move is going to trap bulls and then drag them back down.” One note of caution about the short-term outlook, however, came late in the week from Jeffrey Hirsch, editor of the Stock Trader’s Almanac , who said to beware the week after stock options and stock index futures expire — as they did on Friday. Trading the week after is often treacherous, Hirsch said, with the Dow Jones Industrials falling in 27 of the past 33 years and the S & P 500 down in 23 of 33 years. Looking ahead, anyone banking on a summer rally in stocks should be mindful that historically it’s the weakest of all four seasons, Hirsch said. The almanac says winter rallies average 12.9%, versus 11.8% in the spring and 11.1% in the fall. Summer rallies bring up the rear, averaging 9.4%. Week-ahead calendar Tuesday 8:30 a.m.: Housing starts and permits (May) Earnings : FedEx, La-Z-Boy 11:45 a.m.: New York Fed’s John Williams speaks Wednesday 10 a.m.: Fed chair Jerome Powell delivers the Semiannual Monetary Policy Report to House Financial Services Committee 10 a.m.: Senate Banking Committee nomination hearing for Fed vice chair-nominee Philip Jefferson, Fed governor Lisa Cook and Fed governor nominee Adriana Kugler Earnings : Winnebago, Enerpac Tool Group, Avid Bioservices, Patterson Cos., KB Home Thursday 4:00 a.m: Fed governor Christopher Waller speaks in Dublin 8:30 a.m.: Initial jobless claims (week ended June 17) 10 a.m.: Fed chair Jerome Powell delivers Semiannual Monetary Policy Report to Senate Banking Committee 10 a.m.: Existing home sales (May) Earnings : Darden Restaurants, FactSet, Accenture, Commercial Metals Friday 9:45 a.m. S & P Global PMI composite (June) Earnings : CarMax — CNBC’s Michael Bloom, Fred Imbert and Alex Harring contributed to this report.