Wall Street is wondering whether the tech rally that’s pushed the S & P 500 through record after record this year can continue, even as some cracks emerge in the market outlook. Markets are increasingly bifurcated lately. The S & P 500 and Nasdaq Composite , which are heavily tilted toward Nvidia and megacap tech stocks, are each on pace to notch their seventh week of gains in eight. Meanwhile, the Dow Jones Industrial Average , the 30-stock blue chip index without a severe bent toward tech, is on track for its third losing week in four. .SPX YTD mountain S & P 500 near record highs A peek inside the major indexes also reveals a similar pattern. Information technology is the best-performing sector in the S & P 500 this week, gaining 6.2%. But the next-best sector, communication services, has barely advanced 1%. Week-to-date laggards such as bank stocks and consumer staples are set for a losing week, potentially pointing to weakness in the consumer. Now, investors are wondering how much further the broader indexes can go on the backs of its market leaders, especially if any of them start to run out of steam. Nvidia, already having posted a monstrous rally in 2024, rose another 7% this week and is on pace for its eighth straight weekly gain. Apple is set to close out the week with an 8% gain after the iPhone maker announced its artificial intelligence ambitions. “Underlying equity indices in U.S. are being driven by a smaller and smaller subset of names,” said Jeff Klingelhofer, co-head of investments at Thornburg Investment Management. “Today, it’s basically Magnificent One — Nvidia — and Nvidia’s an amazing, amazing company, but it isn’t the U.S. economy, and underlying overall stocks should represent the overall economy.” “So I think the most acute pressure is on megacap tech,” Klingelhofer continued. The investor anticipates a correction this year for U.S. equities, in particular the large-cap tech stocks, of 10% or possibly even greater should the economy start to slow meaningfully. As it is, the S & P 500 is already above 5,400, having advanced more than 13% this year. That’s way past the consensus view on the Street. On average, strategists according to a CNBC survey were anticipating the broad market index would end the year at 5,220; on a median basis, at 5,300. Market outlook Other market observers are concerned investors are in for a rude awakening. Brian Nick, senior investment strategist at the Macro Institute, thinks the economy is headed toward a recession, citing growing weakness in the labor market such as a rising unemployment number. He expects stocks could plunge 20% to 30% from wherever they top out after the Federal Reserve starts cutting rates, though he anticipates this outcome may not happen until 2025. “We think the stock market eventually catches up to this, or actually reacts ahead of the rate cuts,” Nick said. “So, by the time the rate cuts get here, the bad news is already sort of upon us.” Dave Sekera, chief U.S. market strategist at Morningstar, also sees downside risk in the second half of the year for an equity market he thinks now as fairly valued. But others believe equities can still end the year higher, with the tech leadership intact, even if the back of the year is more volatile. These investors point out that tech, which has made up ground from its devastating losses in 2022, can still have further upside. “I think both things can be true,” said Dave Donabedian, investment chief at CIBC Private Wealth. “You can have leadership from the technology space, but also have other sectors also going up.” He expects that an increasingly good corporate earnings story, as well as easing inflation, will be supportive of equities, even large-cap companies. “When the fundamentals are that positive, valuation itself is not an obstacle to higher prices,” Donabedian said. “So, I would say somewhere between now and the end of the year, the market will stumble and we’ll have a pullback or correction, because that’s normally what happens. But I think that the underlying fundamentals argue that by year end, we’ll be somewhat higher than we are now.” Winners and losers market David Miller, investment chief at Catalyst Funds, also said the S & P 500 could end 2024 with a 17% or 18% gain. The benchmark was last up 13.5%. He expects the bifurcation in markets to continue to play out as well, in particular benefiting megacap companies Microsoft or Google parent Alphabet. He said, “I think generally these companies, when they win global market share, can be the winners for a long time because the world is continuing to grow.” But he noted that any company with “very high” gross margins, strong free cash flows with monopolistic characteristics will continue to outperform. He prefers names such as Visa or Mastercard, as opposed to industrials such as American Airlines or Delta Air Lines. He also favors Novo Nordisk, TransDigm and AutoZone. Miller said, “I think it’s much more like a winners and losers type of market.” Next week will be a holiday-shortened week. Markets will be closed Wednesday for the Juneteenth holiday. Week ahead calendar All times ET. Monday June 17 8:30 a.m. Empire State Index (June) Earnings: Lennar Tuesday June 18 8:30 a.m. Retail Sales (May) 9:15 a.m. Capacity Utilization (May) 9:15 a.m. Industrial Production (May) 9:15 a.m. Manufacturing Production (May) 10 a.m. Business Inventories (April) Wednesday June 19 Juneteenth Holiday 10 a.m. NAHB Housing Market Index (June) Thursday June 20 8:30 a.m. Building Permits preliminary (May) 8:30 a.m. Current Account (Q1) 8:30 a.m. Continuing Jobless Claims (06/08) 8:30 a.m. Housing Starts (May) 8:30 a.m. Initial Claims (06/15) 8:30 a.m. Philadelphia Fed Index (June) Earnings: Kroger , Darden Restaurants Friday June 21 9:45 a.m. PMI Composite preliminary (June) 9:45 a.m. S & P PMI Manufacturing preliminary (June) 9:45 a.m. S & P PMI Services preliminary (June) 10 a.m. Existing Home Sales (May) 10 a.m. Leading Indicators (May) Earnings: CarMax