Tech stocks pull the market higher, but it’s all up to the Fed now
With all the wild volatility and hair pulling over the fate of bank stocks, the average person on the street probably thinks the stock market took a crater this week. But that’s not the case: The S&P 500 is up 2.6%. They can owe much to the performance of tech stocks, where the bulls have once again taken the reins. Large swaths of the S&P 500 remain underwater this week, but not technology and its tech-like cousins Communications Services: S&P sectors this week: Banks down 7.3% Energy down 5.7% Materials down 2.1 % Down Industrials Down 1.0% Health Care Up 2.5% Technology Up 5.8% Communication Services Up 7.4% Technology and Communication Services together make up about 35% of the S&P 500, so if these two sectors are strong move, it can drag the entire S&P Index up with it. All of the biggest tech stocks posted big gains this week: AMD Up 17% Metaplatforms Up 14% NVIDIA Up 11% Alphabet Up 11% Microsoft Up 11% Intel Up 11% Amazon Up 10% Apple Up 5% But the tech rally is broader than the mega caps. “Technology themed” ETFs, which focus on a small slice of the tech market, have also rallied, with ARK Innovation (ARKK) up 8.9%, First Trust Internet (FDN) up 7.2%, and Semiconductor (SMH) up 7.2% Up 5.8% Cloud Computing (WCLD) Up 5.9% Social Media (SOCL) Up 5.2% Robotics/Artificial Intelligence Up 3.0% What’s up? The tech bulls “expect a moderate rate hike” from the Federal Reserve, Alec Young, chief investment strategist at MAPsignals, told me, meaning the bulls expect the Fed to hike rates when the next meeting ends on March 22, but that may be the last. That makes some sense. To the extent that the big risk for technology stocks is that the Fed continues to hike rates, any sign of a turnaround would be positive for the sector. The market has now believed that. Fed funds futures, which are futures contracts based on where the federal funds rate might be, are now pricing in the possibility that the Fed could start cutting rates sometime in the middle of this year. That’s a big change from just two weeks ago when the Fed was expected to hike rates further and keep them high for at least the rest of the year. Still, there’s a long way to go until 2020, when the Fed pumped money into the system. Despite aid for the banks, the Fed is still trying to withdraw liquidity. “I think a lot of people seem to think we’re getting lightning in the bottle again for ARK stocks, but I think 2020/21 is very different than it is now, even with a moderate rate hike,” Academy’s Peter Tchir told me Securities.
https://www.cnbc.com/2023/03/17/tech-stocks-are-pulling-the-market-higher-but-its-all-up-to-the-fed-now.html Tech stocks pull the market higher, but it’s all up to the Fed now
