The S&P 500 (^GSPC) is back near all-time highs, thanks to a recent rally in tech stocks. One standout performer in this sector is Nvidia (NVDA), which has seen a nearly 30% increase in its stock price. Since hitting a bottom on Aug. 5, the index has surged more than 7%, with tech giants like Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) collectively adding over $1.4 trillion in market cap. This accounts for almost half of the S&P 500’s $3.2 trillion market cap gain during this period.
The Nasdaq Composite (^IXIC) also experienced a quick turnaround, exiting a correction in just 11 days, marking its shortest correction since October 2011. According to Ed Clissold, chief US strategist at Ned Davis Research, the rebound in tech stocks was expected after leading the losses in the previous drawdown.
As the market anticipates Nvidia’s upcoming earnings report on Aug. 28, investors are closely watching the performance of AI-powered companies. While some of Nvidia’s competitors have struggled to meet Wall Street’s expectations during the second quarter earnings season, the overall sentiment remains positive for the sector.
Despite the recent surge in tech stocks, there have been promising developments in other sectors as well. The S&P 500 equal-weighted index (^SPXEW) hit a new record high, indicating a broadening rally beyond Big Tech. Sectors like Utilities (XLU), Consumer Staples (XLP), and Health Care (XLV) are at 52-week highs, while Financials (XLF) are at record levels.
Abby Yoder, JPMorgan US equity strategist, views the current rally as healthy and broad-based, with strong participation across different sectors and names. While the S&P 500 has outperformed the equal-weighted index this year, the overall market trend remains positive.
Recent economic data suggests a slowing but still growing US economy, aligning with the soft-landing-fueled broadening out trade strategists have been discussing since the beginning of 2024. Despite tech’s continued contribution to the rally, Yoder believes that other sectors could see further rotation as the growth backdrop remains healthy and the Fed prepares for an interest rate cutting cycle.
In conclusion, the recent surge in tech stocks, led by Nvidia, has propelled the S&P 500 back near all-time highs. While tech remains a key driver of the market’s latest leg higher, promising developments in other sectors indicate a broadening rally. With a positive growth backdrop and upcoming Fed interest rate cuts, the market outlook remains optimistic.