For U.S. stock market investors, especially those focused on tech stocks, every pullback has proven to be a buying opportunity. Once again, this idea holds true as the Nasdaq Composite is approaching its all-time high.
This would mark its first new peak since July 10, signaling that tech stocks have shaken off the summer slump and are back in full force.
Tech's Rollercoaster
Earlier, tech stocks went through a rough patch, sliding from being the leading sector to one of the worst performers. In Q3, the IT sector was the second-worst performer in the $.SPX(.SPX)$.
2024 has seen a shift in market dynamics. The first half of the year was dominated by tech stocks and a handful of big names. But over the past three months, the market has seen a dramatic reversal. With expectations of a Fed rate cut and optimism that the U.S. will avoid a recession, other sectors have joined the rally, leading to more broad-based gains.
As a result, while tech stocks are still leading the charge in 2024, their advantage has narrowed. For instance, utilities—up nearly 20% in Q3—aren't far behind. The communication services sector, also tied to tech, ranks third.
A Tech Comeback
Despite the narrowing lead, tech stocks are once again pushing for record highs. The S&P 500's tech sector is just 3.5% away from its July peak, while the $.IXIC(.IXIC)$ is only 2% off. Meanwhile, the S&P 500 and $.DJI(.DJI)$ indices have been setting new highs in recent weeks.
According to Bret Kenwell, U.S. investment analyst at eToro, signs of a tech recovery emerged in September, and he expects the rally to continue into Q4. Many well-known tech companies have been favored by dip buyers, and upcoming earnings reports will likely give the sector an extra boost.
Big Names Leading the Charge
Several major tech stocks have already rebounded.
Earlier this week, $NVIDIA Corp(NVDA)$ , considered a leader in artificial intelligence, hit a new record high—the first in four months.
Software company $Palantir Technologies Inc.(PLTR)$ , which joined the S&P 500 last month, continues to reach new peaks.
$Meta Platforms, Inc.(META)$ also hit a new high in October, and semiconductor giant $Broadcom(AVGO)$ is nearing its own record.
However, $Microsoft(MSFT)$ is still down more than 10% since its July 5 record.
So far in 2024, the S&P 500 is up 23%, with tech stocks remaining the biggest contributors. But other sectors are catching up, and new drivers are emerging.
For example, in August, the spotlight was on defensive stocks, as well as interest-rate-sensitive sectors like utilities, consumer staples, and REITs. Since early October, cyclical stocks—including industrials and financials—have surged.
A Broad-Based Rally?
Ryan Detrick from Carson Group has long awaited a market rally that lifts all sectors, and it seems his wish has finally come true. But, as always, there are concerns about bubbles forming, particularly in the options market, which is growing more pronounced.
In short, while tech stocks are pushing back to the top, it's not just a one-sector story anymore.
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