A renewed rally in tech giants extended this year's surge in the S&P 500 to 10% as bond yields fell ahead of Friday's jobs report amid bets the Federal Reserve will pause its interest-rate hikes in June.
After a brief respite in the colossal advance of big tech fueled by the artificial-intelligence frenzy, the cohort is back in full force. Nvidia Corp. climbed over 5%, leading gains in the Nasdaq 100.
Aside from the obsession for anything AI-related that drove megacaps up 17% in May, the group also got a lift after weak factory data spurred a slide in Treasury rates.
"One can rightly ask how many more 'Mays' we can have, where U.S. big tech is almost the only place to find outsized positive equity returns anywhere in the world," said Nicholas Colas, co-founder of DataTrek Research. "The old Keynesian saying that goes, 'markets can remain irrational longer than you can stay solvent' feels especially relevant in the current investment environment."
The S&P 500 rose about 1% on Thursday, reclaiming its 4,200 mark. A contrarian indicator from Bank of America Corp. that compiles Wall Street strategists' allocation recommendations is the closest it has been to notching a "buy" signal since 2017.
The gauge yields an expected return of about 16% for the US the equity benchmark over the next 12 months.
'Extremely Nimble'
To Matt Maley at Miller Tabak, no matter how bullish investors might be about the potential for artificial intelligence, they should be prepared to weather corrections along the way.
"Investors will need to be quite careful, and extremely nimble, after these recent parabolic advances," Maley said. "Sometimes, the deep corrections are long-lasting, like we saw after the dot-com bubble burst. Sometimes, they only last for a few weeks and are followed by new, very strong rallies that take the stocks even higher."
