Citadel Securities urges buying stocks after S&P 500's 1.5% rally

The S&P 500 climbed 1.5% to 7,600.50 on Monday as Citadel Securities declared the summer's technical reset complete and urged buying stocks again.

"The technical reset we have been waiting for has largely occurred. July did not change the structural bull market. It reset it," Scott Rubner, head of equity and equity-derivatives strategy at Citadel Securities, said.

Rubner said forces that propelled U.S. stocks to record highs this year remain "firmly intact" after a reset in retail investors' speculative trading. "Markets are transitioning from a flow-driven environment back to one increasingly dictated by earnings, corporate demand, and the macroeconomic backdrop," he wrote in a note to clients.

The call lands as the Nasdaq 100 rose 1.8% to 28,776.80 and the Dow Jones Industrial Average added 1.3% to 53,178.41, with the small-cap Russell 2000 jumping 1.8%. The 10-year Treasury yield slid almost 6 basis points to about 4.688%, while Brent crude fell 4.73% to $83.77 a barrel.

Retail Speculation Resets as Earnings Take Over

Rubner described the recent trading setup as one of the "most technically challenging" Citadel has seen in years, a stretch marked by heavy retail speculation that has since unwound. With that flow pressure easing, he said the market's direction now hinges on fundamentals rather than speculative flows.

The shift is visible in the tape. The VanEck Semiconductor ETF rose 1% on Monday as Nvidia, Broadcom and Advanced Micro Devices gained, while the Vanguard Information Technology ETF added 2% and the Roundhill Magnificent Seven ETF soared 3.5%. Of the 307 S&P 500 companies that reported through Friday, 86% beat analysts' earnings forecasts and 68% topped sales estimates, according to data cited by Matt Orton, chief market strategist at Raymond James Investment Management.

Earnings and Jobs Data Carry the Bull Case

With U.S.-Iran diplomacy swinging between escalation and de-escalation, the on-again, off-again nature of the conflict means earnings and jobs data will do the heavy lifting for bulls this week, according to Chris Larkin at E*Trade from Morgan Stanley. Roughly 15% of the S&P 500 by market capitalization is scheduled to report, including SpaceX's inaugural report as a public company on Tuesday.

Manufacturing data offered support, with U.S. factory activity expanding in July at the fastest pace in more than four years as demand held up and firms added workers. Rubner's call suggests the pullback that began in July, which he framed as a reset rather than a break in the structural bull market, has cleared the way for buyers to step back in. For portfolio managers, the shift from flow-driven trading to an earnings-led tape argues for a return to stock selection over index-level hedging, with the next test arriving as the jobs report and a fresh wave of megacap results land this week.

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