The JPMorgan trading desk has upgraded its view on US equities from "tactically neutral" to "bullish," arguing that economic data and corporate earnings will support a continuation of the market's strength.

The trading team led by Andrew Tyler, the firm's head of US market intelligence, said stronger-than-expected economic activity, a resilient consumer, solid corporate profit growth, and potentially stabilizing bond yields prompted them to drop their previous cautious stance before this Friday's US employment report.

"With bond yields finding a relatively stable level and oil prices potentially drifting lower, we now see a more favorable market environment," Tyler wrote in a note to clients on Monday morning.

Tyler had accurately turned tactically cautious in early June before several consecutive weeks of declines in US stocks. At the end of August, he also held a cautious view on US equities after Fed Chair Kevin Warsh delivered a hawkish speech at Jackson Hole and the market ramped up bets on rate hikes this year.

Recent market volatility has clearly subsided. According to compiled data, the S&P 500 Index had gone 41 consecutive trading sessions without a single-day drop of more than 1% as of last Friday, the longest streak since October 2025. The index's last significant decline came on July 29, the day of the Fed's rate decision, when it fell 1.5%.

Heading into October — traditionally the most volatile month for US stocks — Wall Street still has to contend with multiple risks, including whether the AI trade can persist and the threat of further rate increases amid still-sticky inflation.

Tyler said the key events affecting the stock market in the near term include this Friday's closely watched US employment report, the Consumer Price Index release on October 14, and the Fed's rate decision on October 28.

Economists expect US nonfarm payrolls to have increased by 90,000 in September, after an unexpected surge of 162,000 in August.

Within the tech sector, Tyler expects the rally in semiconductor stocks to potentially broaden further, and the "Magnificent Seven" may also outperform the broader tech sector.

"The AI theme is likely to persist, and we are happy to hold this theme," he said. "In the short term, we are bullish on tech stocks, and corporate earnings may provide further support," he wrote.

As for cyclical stocks, he believes a bull steepening of the yield curve is needed to form a sustained rally; excluding AI-related names, he prefers bank stocks, citing reasons including renewed growth momentum, a potentially steeper yield curve, and a favorable outlook for capital markets.