The main driver of the stock market rally in the second half of 2023 has faded.
Investors are increasingly wondering when the U.S. Federal Reserve will cut interest rates, with so-called “soft landing” trades in which investors concentrate on interest rate-sensitive sectors expected to begin in 2024. I'm stumbling.
That begs the question: What's the next trigger? Investors may need to look no further than the tech sector (XLK). Despite recent enthusiasm for small-cap stocks and other active trades that could benefit from a Fed rate cut, technology gains in the coming weeks remain key to lifting markets out of January's slump. It will be.
For Keith Lerner, co-CIO at Truist, it's a simple math equation. The tech sector makes up nearly 30% of the S&P 500 Index, by far the largest share of the 11 sectors, and the Magnificent Seven tech stocks alone account for nearly 30% of the index's market capitalization. Trends in these areas remain important to investors. More extensive index.
“The ability for tech companies to show profits and grow profits at a good pace is critical to continuing to move this market forward, even if growth slows because there is still concentration. I think there is,” CIO Keith Lerner told Yahoo Finance on Wednesday ahead of the tech company's earnings call.
Taiwan Semiconductor (TSM) took a leading role Thursday as the chipmaker that supplies companies like Apple (APPL) and Nvidia (NVDA) announced better-than-expected quarterly results before the opening bell.
The company's adjusted earnings per share were $1.48, beating Wall Street expectations of $1.38. And, perhaps more importantly, the chipmaker said artificial intelligence is fueling its success. Taiwan Semiconductor said it expects sales to increase by 20% in 2024, due in part to demand for AI.
The Semiconductor Index (^SOX) rose nearly 3% on this news, but Nvidia (NVDA), Its weight in the S&P 500 is almost as large Entire energy sectorwhich soared more than 2% before smoothing out gains.
The iPhone maker's stock price rose nearly 3% due to semiconductor developments and Bank of America's upgrade of Apple (AAPL) stock. Analyst Wamusi Mohan changed his rating from Neutral to Buy and raised his price target from $208 to $225, citing artificial intelligence and the new Vision Pro headset as key factors.
The tech-heavy Nasdaq (^IXIC) rose more than 1% on Thursday morning following moves in Apple and semiconductor stocks, while the S&P 500 (^GSPC) announced that interest rate cuts will be in place until November 12, 2018. The stock rose more than 0.5% in response to a comment from a senior Federal Reserve official that there was no such thing. Profits were suppressed in the third quarter.
The BofA survey marked a reversal of recent tone on Wall Street, with analysts turning bearish on Apple amid questions about iPhone demand, among other things. And this comes at a critical juncture, ahead of Apple's financial results announcement scheduled for February 1st.
Other tech giants are expected to release reports in the next two weeks, starting with Netflix on Jan. 23, and Wall Street strategists expect these reports to be a key turning point for the market. ing.
BofA equity strategist Ohsung Kwon told Yahoo Finance in early January what could be driving stock prices higher: “Companies have been cutting costs through depressed earnings.” “They're managing margins. Margins have increased for the second consecutive quarter. So given that interest rate pressure and macro uncertainty has eased some, I hope companies speak more positively this earnings season. , I think the momentum will be on the upswing. Now, it's going to be bullish on stocks. ”
For now, technology is a sector that ticks these boxes and drives up the average.
Josh Schafer is a reporter for Yahoo Finance.
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