By Isabel Wang

History and seasonal weakness may lead to a pullback in U.S. stocks over the next few weeks, say Bespoke analysts

The tech-heavy Nasdaq 100 index on Thursday scored a daily advance of over 3% to close at its all-time high for the first time since March 2000, a scene in some ways reminiscent of the dot-com era over two decades ago which led up to the bursting of the bubble preluded the recession, according to Bespoke Investment Group.

"March 2000 is certainly a scary period to think about for investors," said analysts at Bespoke in a client note viewed by MarketWatch on Friday. "Even though the Nasdaq 100 NDX hasn't experienced an over 3% gain to close at all-time highs since March 2000, there were 32 of these instances throughout the 1990s leading up to the ultimate dot-com bubble peak." (See chart below)

Similar to the Nasdaq 100, Thursday was also the first time the S&P 500 SPX had a one-day advance of at least 2% to close at a new all-time high since March 2000, according to data compiled by Bespoke.

The green dots in the chart below highlight the 21 times the large-cap benchmark index had an over 2% gain and closed at an all-time high since 1952, and how it performed in the days and weeks following these instances.

"Notably, the market did trade heavy over the next day, week, and month, but the index managed to average a gain of roughly 2% over the next three months," Bespoke said.

The U.S. stock market has been partying since it bottomed in October. Mega cap technology stocks continued to lead the way, while investors parsed through another slate of quarterly results that signaled an escalating AI frenzy and a flourishing economy, while still struggling to price in when the Federal Reserve will deliver its first interest-rate cut in 2024.

Three benchmark stock indexes on Thursday skyrocketed after a blowout revenue forecast from the AI darling Nvidia Corp. (NVDA), which spurred the biggest one-day gain in market capitalization by any U.S. company. The Dow Jones Industrial Average DJIA and S&P 500 indexes set another round of record closing highs, while the Nasdaq Composite COMP settled just shy of its first record close since 2021, according to FactSet data.

See: Today's Big Tech-dominated stock market has shades of dot-com bubble, strategists warn

Market participants have been debating whether the rush into the so-called Magnificent Seven over the past year resembles the dot-com bubble of 1999, a period when stocks also rode a wave of technology hype only to come crashing down when the bubble popped in 2000 and caused a mild recession the following year.

To be sure, Bespoke analysts didn't draw a direct parallel between the dot-com bubble and the current stock rally, but they said the historical pattern, as well as the seasonality that next month is usually "one of the weakest periods of the year" may indicate that the U.S. stock market is due for a pullback over the next few weeks.