Market Rally Fatigue Signals End to Wall Street 30-High Streak

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•  24 Sep 2025
 

•   BABA  
   
  +0.05%
•   LAC  
   
  +0.33%
•   MRVL  
   
  -1.01%
•   MU  
   
  +0.74%

Wall Street remarkable momentum is showing early signs of exhaustion after driving major indices to over 30 new record highs throughout 2025. Despite the impressive rally, market experts are warning that the AI-fueled surge may face near-term headwinds as momentum investing reaches potentially unsustainable levels.

The SPY has not experienced consecutive declines of more than 1% since last April, marking an extraordinary period of stability and growth. However, this unprecedented strength may be creating conditions for increased volatility ahead as investors reassess risk levels and positioning.

Charlie McElligott from Nomura identifies artificial intelligence momentum as the primary driver behind the market's positive sentiment. Yet he cautions that markets could face downside risks if momentum investments begin to fade, particularly given that many investors are already operating at elevated exposure levels and valuations.

The QQQ declined 0.9% as technology stocks faced pressure, with notable drops including Reddit falling 8% and SolarEdge losing 7%. This weakness in growth stocks suggests some rotation may already be underway as investors become more selective.

Ed Yardeni, veteran Wall Street analyst and founder of Yardeni Research, maintains an optimistic outlook with a bold prediction that SPY could reach 7,000 by year-end. Even the most optimistic analysts have been surprised by recently reported earnings strength, with Yardeni noting that American companies have maintained stable profit margins despite geopolitical tensions and strict trade policies.

Since July, there has been a continuous upward trend in S&P 500 earnings forecasts. Early September estimates of 7.1% growth have now jumped to 9.4% for 2025, representing a dramatic shift in just weeks that underscores the underlying corporate strength driving the rally.

The bond market remains relatively stable despite expectations for $70 billion in government bond sales, while the dollar shows modest gains. This stability suggests investor uncertainty about the market's near-term direction, particularly as they await additional Federal Reserve guidance.

Several individual stocks are making significant moves that reflect broader market themes. $MRVL surged 8% following announcement of a new $5 billion share buyback program, while $BABA jumped 9.4% on news of expanded AI investments and launch of its new Qwen3-Max language model. CEO Eddie Wu indicated Alibaba will invest over $50 billion in cloud infrastructure and AI development.

$MU gained despite earlier concerns, reporting better-than-expected fourth quarter results with revenues jumping 46% to $11.3 billion, primarily driven by strong demand for advanced memory in AI data centers. AI-related revenue now comprises 40% of total sales, up from just 19% last year.

The most dramatic individual stock move came from $LAC which soared 67% on reports that the Trump administration is considering acquiring up to a 10% stake in the company as part of renegotiated Department of Energy loan terms for the Thacker Pass lithium mining project in Nevada, developed in partnership with General Motors.

Despite the overall positive sentiment, Craig Johnson from Piper Sandler warns that while positive momentum remains intact, the near-term outlook suggests higher risk if markets continue expanding without strong support from fundamental trends.

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