Big-Tech Winning Streak Eyes History Books Amid Blowout Earnings

(Bloomberg) — A record-smashing rally in megacap high-fliers shows no signs of stopping as blowout earnings readouts from companies including Amazon.com Inc. and Apple Inc. defied warnings of a tech bubble.

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The Magnificent Seven Index is set for its seventh consecutive monthly gain, a streak that was exceeded just once ever. The S&P 500 Index rose 0.2% as of 12:31 a.m. in New York. The benchmark is poised to notch its sixth-straight month of gains after soaring nearly 40% from its April nadir in one of the fastest recoveries in stock market history. The technology-heavy Nasdaq 100 Index rose 0.5% on Friday.

Amazon shares surged after its cloud unit posted the strongest growth rate in almost three years. Apple projected a jump in sales over the holiday season after releasing new iPhones, helping to assure investors that its flagship product remains a growth engine.

“It’s Big Tech that keeps the stock market going, so if that group starts to go down, the whole market starts to go down,” said Matt Maley, chief strategist at Miller Tabak & Co. “Big Tech earnings gave people a lot of relief. Going into this earnings season people were quite concerned about what the results would look like, especially after the recent record-smashing advance.”

Positive developments on the trade front also lifted sentiment, with President Donald Trump touting that the US and China had “settled” their differences on access to China’s rare earths after a meeting with Chinese President Xi Jinping.

Despite upbeat signals from tariff negotiations and technology earnings, investors still face a murky economic outlook after the Federal Reserve earlier this week pushed back on the prospect of further interest-rate reductions, with the US in a data blackout because of the government shutdown.

Kansas City Fed President Jeff Schmid said he voted against the US central bank’s decision to lower rates this week because he’s concerned that economic growth and investment will put upward pressure on inflation. That view was echoed by his Dallas counterpart Lorie Logan who said she did not support the US central bank’s decision to cut interest rates this week and will likely find it appropriate to hold rates steady at the next meeting because inflation remains too high.

Banner Year

US equities have zoomed to another banner year, but going by the derivatives market, there may not be much left in the tank.

Options bets on the S&P 500’s level in late December are clustering near 7,000, a round-number milestone that would put the index up 19% in 2025. But that’s just 2.5% from Thursday’s close of 6,822.34, with two months left to go.

Chinese stocks and gold are the best hedges against a boom in the artificial intelligence trade that has pushed valuations to elevated levels, according to Bank of America Corp. strategists.

The S&P 500 trades at 23 times forward earnings, well above its average of 16 over the past two decades. The so-called Magnificent Seven group of tech megacaps accounts for more than a third of the US benchmark’s weight. Valuations across this cohort are even higher, at 31 times forward earnings.

“AI equity leadership ain’t budging for time being and we like gold and China stocks as best boom/bubble hedges,” the BofA team led by Michael Hartnett said in a note.

–With assistance from Julien Ponthus, Bernard Goyder and Neil Campling.

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