A trading week that ended with a thud also marked a turning point,
Yahoo Finance’s Hamza Shaban reports:
A trading week that ended with a thud also marked a turning point. Markets showed signs that the next leg upward won’t require Big Tech to lead the way.
Muscular corporate results and outlooks from a broadened set of sectors have powered lofty expectations. Projected returns for the next year are driving the growth story, and the latest Fed rate cut has further emboldened a move into cyclical names.
“The first eight months of the year the market was dominated by momentum and AI plays; since then, the market has shifted as valuations, sustainability around margins, and debt controversy developed around the technology sector,” said Eric Teal, chief investment officer for Comerica Wealth Management, in a note on Thursday.
But weakened tech enthusiasm leaves space for investor sentiment and returns to improve.
And from the perspective of Wall Street bulls, the more muted mood reflects a moment for the market to catch its breath, and suggests there’s room for investors to continue the rally.
… Some weakness in the AI trade could spur other sectors to rise. As Thomas Shipp, head of equity research for LPL Financial, said in a note earlier this week, an increase in volatility and a retreat from the AI theme may be required for value stocks to outperform next year.
The broadening out will also be spurred on by an accommodating Fed, and a long period of small caps lagging behind their larger siblings, said Teal.
Read more here in the takeaway from Morning Brief.