Tech Megacaps Lead Stocks Higher As U.S. Yields Drop

The stock market welcomed the recent data showing the strength of the economy, although it means the possibility of tightening the policy of the Federal Reserve.

Tech megacaps have led stocks to recover, with the Nasdaq 100 up almost 2% and the S&P 500 posting two losing days. Tesla surged after a 6% drop, Snowflake benefited from its AI partnership with Nvidia, and parent company Facebook's meta platform benefited as Citigroup raised its targets. Alphabet fared even worse, as one analyst said that Google's owners were "too fast" in the field of artificial intelligence.

For the first time since early 2022, the Consumer Confidence Report shows that a larger percentage of people expect stock prices to rise rather than fall, according to Bespoke Investment Group. While a return to bullish sentiment could be a sign of a negative trend reversal, the research firm notes that this has never happened in the past.

Since 1987, there have been only three other periods since 1987, when overall bullish negative sentiment has been registered for at least nine months, Bespik said. During the year, after two negative bands, the S&P 500 rose 10.9% and 19%, respectively, and after a record 18-month rise, the stock index rose again.

“U.S. stocks rose after strong U.S. economic data forced consumer discretionary stocks and investors back into the AI ​​deal,” said Edward Moya, senior market analyst at Oanda. "A strong consumer confidence report likely suggests that the labor market is unlikely to deteriorate quickly, which should confirm expectations that a recession will not occur this year, but most likely next year."

It's also important for Kestra Investment Management's Kara Murphy to note that while consumers continue to spend, much of that confidence comes from labor market forces.

“Are there still inflation expectations in the labor market that the Fed really needs to worry about?” Murphy added.

Indeed, Treasuries fell as strong data fueled speculation that the Fed would start raising rates again after this month's lull.

Ahead of the Fed's stress test results, the $2.9 billion exchange-traded fund that tracks regional lenders rose more than 1.5%.

Analysts generally expect banks to pass the test, even as regulators look to tighten up after several financial sector crises. Several bank executives have recently attempted to lower shareholder expectations for dividend increases and share buybacks, which have been the focus of investor attention over the past few years.

Stocks' recovery on Tuesday extended the S&P 500's June rally, with the indicator posting a fourth straight month of gains, the longest winning streak since August 2021.

The stock market took a decisive turn this month, moving from a period usually associated with worse earnings prospects to a period associated with more favorable earnings prospects.

The Bloomberg Intelligence model, known as the Market Fashion Index, which divides periods into three phases of strong growth (green), moderate growth (yellow) and recession (red), has moved out of a cautious red zone that has persisted for 15 years. It has . many years. months in a row and yellow. This bodes well for the stock, according to BI's Gina Martin Adams and Jillian Wolfe.

In other company news, American Equity Investment Life broke the record by offering $4.3 billion for Brookfield. Carnival is on the rise as some analysts raise their targets for cruise lines. Shares of Delta Air Lines rose after earnings guidance was raised.

Meanwhile, shares in Walgreens tumbled after the drugstore chain lowered its earnings outlook, and shares in Lordstown Motors tumbled after the electric car maker filed for bankruptcy.

Market Watch: Friday, March 12: Technology Stocks Fall as Government Bond Yields Rise