Watch out for the threats that could derail the big rally

After a rally for the ages, the week ahead presents investors with some risks, maybe some big risks if people aren't careful.

There are a few earnings reports to watch out for. Delta Air Lines (DAL) , due Thursday, started warning about bookings in March.

Still, the second-quarter earnings season doesn't really kick in for real for another week.

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Which leaves investors, whether professional managing billions or small investors trying to build a retirement stake, left to their own devices.

So here's how the next week sets up.

The market itself

The big rally since roughly April 7 has made more money for stocks overall in two months than they did in all of 2024.

The S&P 500 finished the week at 6,275. The close was a record, and the index hit a 52-week high of 6,285.

The Nasdaq Composite also closed at a record 20,601, and it set a 52-week high of 20,624. The Nasdaq-100's close was a record 22,867 and reached as high as 22,896 on Friday.

The Dow Jones Industrial Average closed Friday at 44,829, its best finish in 2025. It's just 0.5% below its 52-week high of 45,074, reached in December.

The small-cap Russell 2000 average ended Friday at 2,249, up 1%, but has struggled to keep pace with its brethren.

Here's how the numbers work:

S&P 500, up 29.9% since its 52-week low on April 7.
The Nasdaq Composite: up 39.4% since April 7.
The Nasdaq-100: up 38,2% from April 7.
The Dow: up 22.4% from April 7.
The Russell 2000: up 29.8% from April 9 low.

But there is a catch: The weak first quarter performance and then the market reaction to President Trump's Liberation Plan on tariffs nearly offset the gains since April.

Here's where the indexes stand for the year:

S&P 500 is up just 6.8%.
The Nasdaq: up 6.7%.
The Nasdaq-100: up 8.8%.
The Dow: up 5.4%.
The Russell 2000: up 0.9%.

The risks ahead

The big rally has many people on Wall Street very excited. Not just because it's so big but because it's what they all dreamed about after Donald Trump won the White House last November.

Stocks would soar, they argued, because:

Taxes would be cut. The big beautiful bill has been passed and signed.
Regulation would be loosened. The administration, for better or worse, is doing just that.
Animal spirits, Wall Street's favorite catch phrase, would be set free.

Here are the risks the markets face.

Tariffs — again

President Trump wanted all trade negotiations with some 90 countries to be done signed by July 9.

If a deal isn't done, the administration will send out letters as early as Monday saying in effect, “Here's what your tariff will be starting Aug. 1.” From, maybe, 25% or so on European motor vehicles to 70%.

The question is if the Administration will impose the tariffs as suddenly and crazily, as Trump threatened in April.

More Economic Analysis:

Traders working on the floor of the New York Stock Exchange on July 2.

Bloomberg/Getty Images

Is the economy prepared for a trade war?

Thursday's jobs report looked bullish on the surface, and a number of Wall Street firms started to boost their S&P 500 price targets.

When 2025 opened, 7,000 on the index was the upper end again. Many analysts chopped forecasts back in April.

But looking deeply into the jobs report suggests that private-sector employment was largely flat from May to June. The gains the Labor Department reported were concentrated mostly in government and non-profit sectors.

How will AI affect the economy?

Meanwhile, tech companies are laying off thousands.

Microsoft (MSFT) announced 9,000 job cuts just this past week.

And the future? We'll let Ford (F) CEO Jim Farley's recent prediction do the talking:

“Artificial intelligence is going to replace literally half of all white-collar workers in the U.S.” he told biographer Walter Isaacson at the Aspen Ideas Festival last month.

Is anyone ready for that?

What about ‘Drill baby, drill!'

President Trump's promise his policies will generate much more oil drilling in the United States assumes oil prices will remain.

A warning: OPEC+, the group that follows production policies of when the Organization of Petroleum Exporting Countries, agreed Saturday to raise production by 548,000 barrels per day in August.

The move further accelerated output increases at the group's first meeting since oil prices jumped — and then retreated — following Israeli and U.S. attacks on Iran in June.

West Texas intermediate, the benchmark U.S. crude, finished Thursday at $67 a barrel. It's down 7.3% this year.

Baker Hughes oil-rig data shows 539 rigs operating in the United States as of July 3, down 8% from a year ago.

Stocks may be getting pricey

Relative strength indexes for all the indexes we've discussed ended Friday above 70, a signal prices are getting frothy.

The indexes themselves may not be badly overbought: You need an RSI of 80 more to make the case. Even then, the animal spirits might not give up the game.

But, when Thursday ended, 87 S&P 500 stocks had RSIs above 70. (U.S. markets were closed Friday for July 4.)

Of these, 15 showed RSI levels above 80. Tops is Jabil Inc. (JBL) at 89. Others include financial giants Goldman Sachs (GS) , Citigroup (C) , State Street (STT) . JP Morgan Chase (JPM) , Morgan Stanley (MS) .

Bank of America's (BAC) RSI is at 79.

Again, high RSI levels don't mean stocks are ready to tumble. But a mistake — in the economy, in politics, in the markets — will make it easy for the risk-averse to commence some selling. We wlll probably see some this summer.

Futures trading late Friday showed indexes falling. Sunday's late trading will offer a clearer picture.