Big tech stocks started 2023 on a high, but that has spread to other sectors in recent weeks. Xinhua/Wang Ying/Getty Images
In the first half of 2023, big tech stocks led gains in US stock markets, fueled by an explosion of interest in AI.
But the rally is now spreading to other sectors – June was the best month of the year for the S&P 500 index.
An indicator of US stock market breadth just hit its highest level since February.
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For most of 2023, the rise of artificial intelligence (AI) was the dominant theme for stock investors — contributing to a staggering rise in the “Magnificent Seven” big-tech stocks like Apple, Microsoft, and Nvidia.
However, there are signs that the rebound is now spreading to other sectors.
June was the best month since October for the leading S&P 500 index, up 6.5 percent, hot on the heels of FAANG Group, the big tech companies listed on the New York Stock Exchange.
Suddenly, everyone is using the word “breadth” to describe a rally that lifts a broad mix of stocks rather than just a handful of select stocks. The proportion of S&P 500 stocks trading above their 200-day moving average — an indicator of market breadth — climbed to 65 percent this week, the highest since mid-February.
“We’ve strayed a bit from the Magnificent Seven,” Kathleen Brooks, founder of Minerva Analysis, said in a recent interview with Business Insider.
“I know they’re still very important to the markets, but we’re actually seeing broader performance, with a number of stocks across sectors making 52-week highs,” she added.
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A look at the list of the 10 best-performing stocks since the start of the year reinforces Brooks’ belief that the 2023 rally is no longer just about technology — alongside Nvidia, Meta and Tesla are General Electric, the home builder Pultegroup and three cruise lines.
One factor driving the rise may be that investors, seeing Big Tech’s massive gains in the first six months of the year, have decided to sell their shares for a profit before diversifying into other sectors, according to UBS .
“Investor enthusiasm about the potential of artificial intelligence to boost the technology sector has also supported stock gains year to date,” said Mark Haefele, CIO of the Swiss bank, in a recent statement.
“However, in June there were signs that mega-cap AI stocks were consolidating and that the rally was spreading to laggards as well,” he added.
Positive economic data has also helped non-tech stocks as inflation gradually cools towards the Federal Reserve’s 2% target and unemployment stayed below 4% despite the central bank’s aggressive rate hikes in May.
With much of Wall Street warning of a possible recession, there’s no guarantee these gains will last — but for now, the spillover beyond the tech sector looks like good news for investors.
“It’s a sign of a really healthy market and a return to passive investing,” Brooks said, “stocks are far from collapsing and are looking even healthier than when the AI rally began.”
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Disclaimer: Stocks and other investments are always associated with risk. A total loss of the invested capital cannot be ruled out either. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. They also do not replace professional advice.
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