Jeran Wittenstein and Ryan Vlastelica
4 min read
In This Article:
(Bloomberg) -- The same technology giants that helped drag the S&P 500 to the brink of a bear market in April are giving the recovery in US equities some legs.
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Nvidia Corp. put a bow on a better-than-expected earnings season for Big Tech last week by delivering a strong outlook for revenue, despite US restrictions on sales of its chips in China. With Nvidia and Microsoft Corp. rallying back to the cusp of record highs, traders are betting the group is poised to lift the broader market.
“I feel really good about tech coming out of this earnings season,” said Brett Ewing, chief market strategist at First Franklin Financial Services. “There’s still more gas in this tank.”
The S&P 500 Index is within 4% of its February record high with much of the rebound being fueled by easing tensions between the US and its trade partners, as well as Big Tech results that showed demand for things like cloud-computing services, software, electronic devices and digital advertising remain intact even as the threat of higher tariffs on sales lingers.
Tesla Inc. is up 56% since the benchmark bottomed out on April 8, while Nvidia and Microsoft have gained 40% and 30%, respectively.
As a result, a Bloomberg gauge of the so-called Magnificent Seven stocks — Nvidia, Microsoft, Tesla, Apple Inc., Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc. — is outperforming the S&P 500 over the past eight weeks — a critical shift for the benchmark considering the group accounts for a third of the index. The cohort is responsible for nearly half of the S&P 500’s 19% rally from the April bottom, according to data compiled by Bloomberg.
Despite the strong performance, the group is still trailing the S&P 500 for the year — a rare occurrence in the past decade. Shares of Apple and Amazon, which face greater risks from tariffs due to products imported, are weighing the cohort down and lag the overall market.
“Buying the tech dip will be a theme throughout the year,” said Ewing. “There’s still a lot of money on the sidelines and it has to be put to work.”
Recovery Risks
Tariffs and other Trump policies remain a big market overhang. On Friday, the benchmark sank more than 1% after Trump accused China of violating an agreement with the US to ease tariffs and a news report that the US plans to place broader restrictions on the country’s tech sector. The S&P 500 managed to recoup most of those losses by the end of the day.
