Stocks have recovered sharply from recent lows as recent economic data has eased recession fears.
Both the S&P 500 (^GSPC) and Nasdaq Composite Index (^IXIC) are in positive territory this month, despite the release of employment data in early August stoking concerns about the health of the U.S. economy and triggering selling.
Since stocks crashed on Aug. 5, the S&P 500 is up nearly 7% and the Nasdaq Composite is up more than 8%. Looking under the hood, we can see that big technology companies are again leading the gains.
The Information Technology (XLK) sector is up almost 12%, with Nvidia (NVDA), the AI-driven spark of the bull market, up more than 21%.
Markets saw a sharp reversal after the latest economic data released this week showed inflation continuing to decline toward the Fed’s 2% target, while consumer spending was holding up and jobless claims were not accelerating.
“The economy is slowing, but it’s still growing, and that’s a really important distinction,” Angelo Kourkafas, senior investment strategist at Edward Jones, told Yahoo Finance. “This isn’t a recession story, as some feared after the last jobs report.”
Strategists said they expect tech stocks to bounce back quickly after the market crash earlier this month.
Piper Sandler’s Harsh Kumar said on Aug. 7 that Nvidia shares have a “huge opportunity” after semiconductor stocks tumbled after The Information reported that the launch of Nvidia’s next-generation AI chips would be delayed by three months. Similarly, Bank of America analyst Vivek Arya said on Monday that Nvidia is at the top of his firm’s “rebound” stock picks as he expects semiconductors to recover by the end of 2024.
The “buy low” energy is spreading beyond Nvidia. Truist Co-Chief Investment Officer Keith Lerner raised his investment rating on the tech sector from equal weight to overweight on August 8, citing improved “risk/reward” dynamics.
During the recent sell-off, tech stocks suffered their worst one-month underperformance relative to the S&P 500 since 2002, according to Lerner’s research. Lerner believes the decline reflects investors escaping a crowded trading session rather than a change in the fundamental conditions of stocks.
“Amid a cooling economic environment, we expect investors to return to tech given the secular tailwinds arising from artificial intelligence (AI) and its favorable growth prospects,” Lerner wrote in a client note on Aug. 8. “Furthermore, we continue to see rising capital spending trends in AI during the current earnings season.”
The story continues
FILE PHOTO: NVIDIA logo on display at its headquarters in Santa Clara, California, in May 2022. Credit: NVIDIA/REUTERS/File Photo (REUTERS/Reuters)
Josh Shaffer is a reporter for Yahoo Finance. Follow him on X Follow.
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