Bullish investors anticipate that corporate solid results will halt the decline in technology shares that has slowed this year’s US stock rally as earnings season gets underway.
The technology sector of the S&P 500 has lost almost six percent of its market value in less than a week as investors shift their money from this year’s winners to industries that have underperformed in 2024 due to growing expectations of interest rate cuts and the second Trump presidency.
The S&P 500 has performed slightly better, down 1.6% in just over a week, with notable gains in sectors like small caps, financials, and industrials offsetting declines in tech. This year, the benchmark index has increased by more than 16 percent.
Second-quarter results may contribute to tech’s comeback to prominence. Tuesday marks the first reporting day for the “Magnificent Seven” megacap group of stocks that have driven markets since early 2023: Tesla and Google’s parent company, Alphabet. Next week, reports from Apple and Microsoft will be released.
There’s a good reason why big tech stocks have been leading the charge,” according to Wells Fargo Investment Institute senior global market strategist Scott Wren. “They are profitable, their earnings are increasing, and they dominate their market.”
Promising outcomes from the top performers in the market may alleviate some of the anxieties plaguing megacaps lately, such as concerns about stretched valuations and an upward trend exemplified by mouthwatering gains in stocks like Nvidia, which has gained 145% this year despite a recent decline.
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