Next pullback could take the S&P 500 below 6,000: RBC

Investing.com -- The next market pullback could push the S&P 500 below the 6,000 mark, according to RBC Capital Markets, which flagged increasing risks following a recent stretch of strong gains.

In a new weekly report, RBC strategist Lori Calvasina cautioned that “if a tier 1 garden-variety pullback (5-10% drawdown) has started, it could take the S&P 500 into the 5,751-6,075 range.”

The benchmark index recently set a post-tariff high in late July, resetting downside scenarios after a volatile first half of the year.

While economic concerns dominated headlines, RBC pointed to corporate earnings commentary as another source of market anxiety.

Despite a solid beat rate on earnings per share (EPS) and revenue, company outlooks often reflected high levels of uncertainty, particularly around tariffs, consumer behavior, and demand visibility.

“We think earnings season is also a reason for equity investors to feel unsettled,” Calvasina wrote.

The return of “market angst” follows a 2.4% weekly drop in the S&P 500 after hitting a new closing high last Monday. The pullback was driven by a hawkish Federal Reserve and a weaker-than-expected jobs report.

Looking ahead, seasonal trends may also work against equities in the near term. “Over the past five years August has been mixed while September has been weak (down 4 out of 5 times), as has October,” Calvasina said.

Positioning indicators and sentiment gauges offer a mixed picture. While daily fear indexes like VIX and SDEX have moved up from extreme lows, the strategist notes that “the stock market has felt a bit frothy,” citing stretched valuations and weak equity fund flows.

Drawing from its historical framework of market stress, RBC reminded investors that even a minor correction could leave the S&P 500 well below current levels.

“Now that a new post-tariff high has been achieved, we can officially declare that the February-April 2025 drawdown was a tier 2 growth scare. With the new high in place, potential downside levels for where a drawdown could take the index have now been reset,” Calvasina explained.

Following the Friday retreat, the S&P 500 futures climbed 0.5% on Monday as of 7:20 ET.