Stocks have roared back from their recent lows as recent economic data has cooled recession fears.
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) are both in positive territory for the month despite a jobs report released in early August that fueled concerns about the health of the US economy and sparked a sell-off.
Since stocks sold off on Aug. 5, the S&P 500 is up almost 7% while the Nasdaq Composite is up more than 8%. A look under the hood shows that, once again, Big Tech is leading the charge higher.
The Information Technology (XLK) sector is up almost 12%. Nvidia (NVDA), the spark plug of the AI-infused bull market, is also up more than 21%.
The swift pivot in market action comes as fresh economic data released this week has shown inflation continues to fall toward the Fed's 2% goal while consumer spending holds up and the pace of jobless claims doesn't appear to be accelerating.
"The economy is slowing, but it's still growing and that's a very important distinction." Angelo Kourkafas, Edward Jones senior investment strategist, told Yahoo Finance. "We're not talking about a contraction, as was the fear after the last jobs report."
Strategists said after the market rout earlier this month that they expected tech stocks to come roaring back.
On Aug. 7, Piper Sandler's Harsh Kumar noted there was a "tremendous opportunity" in Nvidia stock after a report in the Information that Nvidia's upcoming next-generation AI chips would be delayed by three months sparked a sell-off led by semiconductor stocks. Similarly, on Monday, Bank of America analyst Vivek Arya noted Nvidia is one of the firm's top "rebound" picks amid what he expects to be a comeback for semiconductors to end 2024.
The "buy the dip" energy has spread beyond just Nvidia. Truist co-chief investment officer Keith Lerner upgraded the tech sector to Overweight from Equal Weight on Aug. 8, noting the "risk-reward" has improved.
Lerner's work showed that during the recent pullback, the tech sector had its worst one-month underperformance compared to the S&P 500 since 2002. Lerner reasoned the pullback reflected more of a move out of a crowded trade among investors than a shift in the fundamental story for the stocks.
"In a cooling economic environment, we expect investors to come back to tech given some of the secular tailwinds stemming from artificial intelligence (AI) and its premium growth prospects," Lerner wrote in a note to clients on Aug. 8. "Moreover, during the current earnings season, we have seen capital spending trends toward AI continue to rise."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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