But Bank of America/Merrill Lynch strategists and some others say there are a series of hurdles ahead for stocks, and the market may have a hard time getting past them unscathed. "Our view is that we think there's a lot of potential for a sell-off this summer, so potentially we could retest the lows we saw in February, that would be around 1,800. Our year-end target is still 2,000," said Jill Carey Hall, BoFAML strategist.
Hall said the market could easily see a 10 to 15 percent correction this summer. "The big risks are a Fed tightening, as we're still in a profit recession. We have the U.S. election coming up. We have the EU referendum," said Hall. She also said oil could become a negative again. BoFAML expects crude to end the year higher but it could first take another leg down to as low as $39, still well above the February lows of around $26 per barrel.
Peter Boockvar, chief market strategist at The Lindsey Group, said he believes the current rally is a "head fake" and investors are ignoring a weak earnings story, weak data globally and the potential for a pickup in inflation, particularly as oil and other commodities prices rise. "I think the market is way too complacent, and I expect another trip down to the 1,800 level if they raise. That would retest the February lows. They have another jobs number next Friday. What if they have another 150,000 level like they had last month? They could still go but it makes the whole situation more precarious."
The stock market's rally has been a surprise in the week since the Fed revealed in its April meeting minutes that it would like to raise rates next month if the data is strong enough.
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