Nvidia is the key to how stocks will perform in the next few months as investors head into a seasonally weak period for markets, with the macroeconomic picture once again a center of attention. The May jobs report is on deck next week. Stocks capped a winning month in May after a strong earnings season and signs of easing inflation buoyed investor optimism. Nvidia accounted for a chunk of those gains — up 26% this month— as the AI chipmaker's earnings results came in better than expected last week. Many investors expect that means they can stick to what's worked so far this year — namely mega-caps and semiconductors — and passively invest in broad market indexes. But more bearish observers are now concerned that investors are growing too complacent. They worry that investors are dismissing the elevated risk that comes from two major international conflicts, a tense U.S. presidential election, as well as the possibility that the currently bright macroeconomic outlook could darken. .VIX YTD mountain CBOE Volatility Index In fact, the CBOE Volatility Index, known as Wall Street's fear gauge, is currently at 14. That indicates a level of self-satisfaction that could mean sharp moves if the market experiences a shock. The VIX has risen slightly from a low of about 12 in the month of May. "I think that the market is somewhat complacent," said Olivier Sarfati, head of equities at GenTrust, which manages more than $3 billion in assets. "But when this honeymoon is going to stop, and it will, stocks are a lot more of a wild beast than they remember." On balance, Sarfati said he is only a "tiny bit on the underweight side" on stocks heading into the summer, saying the growing downside risk is limited by robust earnings growth. He plans to see how things shake out from here. On Friday, the S & P 500 and Nasdaq Composite registered their first losing week in six, as the recent rally took a breather. The Dow Jones Industrial Average posted a second weekly decline. Nvidia and the market Nvidia's enormous monthly gain raised investor eyebrows. While most are bullish on CEO Jensen Huang's company's long-term prospects, they also believe the recent advance could be "out of control," as Ritholtz Wealth Management CEO Josh Brown wrote in a newsletter this week. Part of that is the broader market's increasing reliance on Nvidia for its advance. While the S & P 500 is up by more than 10% this year, the equal-weighted index, which isn't tilted by each company's market value, has advanced just 3%. Semiconductors have outperformed this month, with the VanEck Semiconductor ETF (SMH) having rallied more than 12%. "The overall market is now increasingly reliant on semis and some of the other mega-cap tech names," BTIG chief market technician Jonathan Krinsky wrote on Thursday. "The longer we go without a sustained rotation into laggards (not just a day or two), the more likely more leaders succumb and the overall index sees a deeper correction." In fact, Jeff deGraff, head of technical research at Renaissance Macro Research, told CNBC's " Closing Bell " that he thinks semiconductors as a group can pull back by as much as 20%. He's urging clients to be cautious as they head into the summer. "This isn't the place to be putting in fresh money," deGraff said. Elsewhere, Wolfe Research macro strategist Rob Ginsberg noted this may be a "pretty good spot" to harvest some gains, citing overbought conditions and a general feeling of euphoria in markets. To be sure, plenty remain positive on equities, saying the trend can continue to favor investors. JC O'Hara, chief technical strategist at Roth MKM, anticipates the S & P 500 could climb to 5,700 over the next several months, with large caps and the index doing well. The broad market index was last around 5,220. Macro data Certainly, stocks are in for what could be a choppy time as they head into a seasonally weak period. Traders will have to rely on macroeconomic data for the next several weeks, including the May jobs report that's on deck next Friday. Some observers hope the jobs data could be positive for equities, if they show the labor market cooling enough to put lower interest rates back on the table. Economists polled by Dow Jones anticipate that nonfarm payrolls expanded by 180,000 in May, compared to 175,000 in April. The unemployment rate is expected to have remained unchanged at 3.9%. "If we do see some further improvement on inflation, which I think is coming, and weakness in the labor market, then I think you have to take the Fed's word for it that that would be enough motivation for them to put easing or rate cuts back on the table," Sage Advisory co-chief investment officer Thomas Urano said. Week ahead calendar All times ET Monday, June 3 9:45 a.m. Markit PMI Manufacturing final (May) 10 a.m. Construction Spending (April) 10 a.m. ISM Manufacturing (May) Tuesday, June 4 10 a.m. Durable Orders final (April) 10 a.m. Factory Orders (April) 10 a.m. JOLTS Job Openings (April) Earnings: Hewlett Packard Enterprise , Bath & Body Works Wednesday, June 5 9:45 a.m. PMI Composite final (May) 9:45 a.m. Markit PMI Services final (May) 10 a.m. ISM Services PMI (May) Earnings: Campbell Soup , Dollar Tree Thursday, June 6 8:30 a.m. Continuing Jobless Claims (05/25) 8:30 a.m. Initial Claims (06/01) 8:30 a.m. Unit Labor Costs final (Q1) 8:30 a.m. Productivity final (Q1) 8:30 a.m. Trade Balance (April) Earnings: J.M. Smucker Co. Friday, June 7 8:30 a.m. May jobs report 10 a.m. Wholesale Inventories final (April) 12 p.m. Fed Governor Lisa Cook gives commencement address at Girls Global Academy, University of the District of Columbia, Washington, D.C. 3 p.m. Consumer Credit (April)
