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New confidence in the U.S. economy’s soft landing spurred a rally in big technology stocks, with Nvidia stock closing at an all-time high on Monday, surpassing its previous all-time high set in July.
The US chipmaker’s stock rose 2.4% to close at $138.07, giving it a market capitalization of $3.39 trillion and within reach of market leader Apple’s $3.5 trillion valuation. It became.
After Nvidia and other big tech stocks slumped this summer, many investors expected a long-term move away from tech and into traditionally out-of-favor sectors such as financial services and industrials. .
But since the Federal Reserve began cutting interest rates last month, the sector has regained momentum, with big companies once again leading the market rally.
“The rotation from mega-caps to other stocks appears to have run its course,” said Dec Malarkey, managing director at SLC Management. “Investors were on the defensive heading into the Fed meeting, but the Fed’s tone since then and subsequent data have been very constructive on risk.”
IT and communications services were two of the worst-performing sectors in the S&P 500 in the third quarter, but they have been two of the best-performing sectors since the September Fed meeting, with IT sub The index rose more than 7%.
However, despite the recent rally, several analysts said the current environment meant that many investors were concerned about irrational exuberance and unsustainable profits, leading to some decisions not being made in the first half of 2024. He argued that there is a difference.
More than 60% of S&P 500 stocks are up, including solid gains in cyclical sectors such as industrials and energy, although the IT sector has been the best-performing sector since the rate cut.
“We’re still not convinced that this is a definitive return to full technology dominance,” said Kevin Gordon, senior investment strategist at Charles Schwab. “It feels more like a comeback, given that other sectors such as financials and industrials were hitting new highs before tech and mega-cap stocks. There is room for the tech sector to make up for some lost ground, as it tends to perform well during rate-cutting cycles.”
A strong start to the third-quarter earnings season boosts optimism about the U.S. economic outlook, with better-than-expected results from JPMorgan Chase & Co. and Wells Fargo on Friday lifting bank stocks in Silicon Valley. This pushed prices to the highest level since before the bank collapse. Meanwhile, the Chinese government’s economic stimulus measures have boosted confidence in the world’s second-largest economy’s prospects and could have positive spillover effects on growth elsewhere.
“Something big has changed” since the first half of this year, Malarkey said. “There is a shift happening where everyone is re-raising their expectations for strong growth and earnings… (and) China’s financial and market stimulus, as well as expected fiscal stimulus, also brightens the global growth outlook. ”
