For a little over a week now since it last made a new high on 7/20, the Nasdaq Composite has been churning around and consolidating its gains as investors await today’s testimony ahead of Congress from Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), and Facebook (FB) and then earnings reports from all four companies after the close on Thursday.  Needless to say, the next two days will go a long way in defining the backdrop for the Technology sector through the rest of the summer.

Since the Nasdaq’s high on 7/20, only one of the Technology sector’s six industries has posted positive returns, and it’s also the smallest industry in the sector.  While the Electronic Equipment industry has gained  1.8% since 7/20, larger industries like Semis, Tech Hardware, and Software are all down over 3%. While these industries have pulled back a bit over the last week or so, QTD they’re all still in the black, and on a YTD basis, they still remain among the market’s top performers with double-digit percentage gains for all three. On the right side of the image below, we show where each industry is trading relative to its 52-week range, while the tail indicates the change since 7/20.  At the Nasdaq’s peak on 7/20, all three industries mentioned above were either at or right near record highs as investors sought growth in a growth starved market.

While Tech has taken a backseat role in recent days, Industrials has been picking up some of the slack. Although the sector has a lot more industries than the Technology sector, it has a much smaller market cap accounting for just 7.9% of the S&P 500 versus Technology’s 26.1% share.  Of the twelve industries in the sector, ten are up since the Nasdaq’s peak on 7/20.  Leading the way higher, Air Freight, Machinery, Commercial Services, and Building Products have all gained more than 3.5%  To the downside, only Airlines and Industrial Conglomerates are in the red since 7/20.

What’s interesting to note about the Industrial sector’s recent performance is that despite the Covid-induced recession, the majority of industries in this sector are much closer to 52-week highs than 52-week lows. The stock market is typically forward-looking, so the recent strength in these cyclical industries suggests that either the market is uncharacteristically clueless or it sees better economic times ahead. Click here to view Bespoke’s premium membership options for our best research available.

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