The stock market’s recent performance has left many investors wondering if a significant correction is on the horizon. After a nine-week winning streak at the end of last year, concerns arose that the market was overbought. However, Chief Market Strategist Keith Lerner at Truist Advisory Services provides some reassurance, noting that the market has been able to alleviate some of these worries through a correction in time and churning, rather than through intense selling pressure.
Notably, the S&P 500 has displayed remarkable resilience, even as 10-year Treasury yields surged to a five-week high above 4.15%. This climb in yields was fueled by strong economic data, causing traders to recalibrate their expectations for Federal Reserve interest rate cuts. Interestingly, just a week prior, when the stock benchmark appeared poised to surpass its record, the 10-year yield was below 4%, suggesting a divergence between stocks and bonds.
Upon closer examination of Thursday’s market activity, it becomes evident that the latest rally was predominantly driven by the tech sector, particularly the chip industry. Taiwan Semiconductor Manufacturing Company’s optimistic revenue forecast spurred a surge in the semiconductor sector, with the iShares Expanded Tech-Software Sector climbing to new two-year highs and the PHLX Semiconductor Index hitting a fresh record.
Moreover, the debt market’s fervor has led to a significant reduction in borrowing costs for riskier companies. This dynamic environment has created an opportunity for these entities to secure funding at more favorable terms, potentially bolstering their prospects in the market.
Overall, despite the concerns surrounding overbought conditions and surging bond yields, the stock market has managed to weather these challenges. It is evident that the tech sector has played a pivotal role in driving the market’s recent performance, demonstrating its resilience and capacity to influence broader market dynamics. With these developments, investors are closely monitoring the evolving landscape and its potential implications for their portfolios.
By
