U.S. technology stocks just posted their largest weekly inflows in nine weeks, with the sector seeing a comeback after its megacap-led rally lost steam by the end of May, strategists at BofA Global Research said Friday.
Tech stocks saw inflows of nearly $1 billion in the week ending Wednesday, the highest in more than two months, after experiencing the same amount of outflows the previous week, a team of strategists led by Michael Hartnett, chief investment strategist at BofA Global Research, said in a Friday client note.
Investors continued to pour money into stocks in the past week, with U.S. equity funds overall securing $4.6 billion in their seventh consecutive week of inflows. Utilities stocks also saw upbeat demand as they drew about $1 billion in the same period, their largest weekly inflows since January 2022, according to the BofA strategists.
The so-called Magnificent Seven group of megacap names led the gains in the stock market over the past week, with the Nasdaq Composite COMP popping nearly 2% to a record close of 17,187 points on Wednesday — recovering from a 1.1% drop that marked its worst week in over a month last Friday, according to FactSet data.
Also on Wednesday, Nvidia Corp. soared more than 5% as its market cap crossed $3 trillion for the first time ever. Meanwhile, Apple Inc.’s market cap also rose above $3 trillion, its first close at or above that mark since January, according to FactSet data.
The rally was further supported by a drop in Treasury yields earlier this week. Both the longer-term 10-year BX:TMUBMUSD10Y and 30-year BX:TMUBMUSD30Y rates hit their lowest levels since March 28 after five straight trading days of declines, according to FactSet data.
However, this trend abruptly reversed on Friday, as unexpected strength in the U.S. labor market forced investors to once again question whether the Federal Reserve would start cutting interest rates this year.
The yield on the 10-year Treasury on Friday rose 14.8 basis points to 4.428%, while the 30-year rate jumped 11.8 basis points to 4.547%, according to FactSet data.
Hartnett and his team said a Fed rate cut would serve as “the first hint of trouble” for the economy. They added that with markets now factoring in a first cut in the second half of 2024, there could be a shift in likelihood to a “hard landing” from a “no landing” scenario for the U.S. economy, they wrote.
Fed-funds futures traders were pulling back on the likelihood of a September rate cut by the U.S. central bank on Friday, pricing in a 46.7% chance versus around 55% a day ago, according to the CME FedWatch Tool.
U.S. stocks finished lower on Friday following a blowout May jobs report which showed the economy added a blockbuster 272,000 jobs last month and the unemployment rate rose to 4% from 3.9%.
The S&P 500 SPX and the Nasdaq Composite were off 0.1% and 0.2%, respectively, while the Dow Jones Industrial Average DJIA lost 0.2%, according to FactSet data.