Tech Stocks Lead Market Rebound as Consumer Optimism Strengthens Economic Outlook

The market staged a impressive turnaround on January 23rd, with technology equities emerging as the primary catalyst for broader gains. The S&P 500 Index advanced +0.25%, while the Nasdaq 100 surged +0.62%, driven primarily by strength in megacap technology holdings. March E-mini S&P futures gained +0.21%, and March E-mini Nasdaq futures climbed +0.64%, signaling continued momentum in tech-focused trading.

Will tech stocks recover their earlier losses? The answer appeared decidedly affirmative as the day progressed. After an uncertain start that saw initial selling pressure, the landscape shifted dramatically when the Magnificent Seven technology stocks—comprising Microsoft, Amazon, Nvidia, Meta, Apple, Alphabet, and Tesla—staged a powerful rally. This resurgence proved instrumental in reversing the broader market’s negative momentum.

Magnificent Seven Technology Giants Fuel Market Bounce

The technology sector’s rebound was nothing short of remarkable. Microsoft surged more than +3%, while Amazon, Nvidia, and Meta each climbed more than +1%. Apple advanced +0.34%, Alphabet increased +0.31%, and Tesla rose +0.13%. These gains reflected renewed investor confidence in the technology complex despite earlier headwinds from other sectors.

The initial market weakness had stemmed from disappointing guidance by Intel CEO Lip-Bu Tan, whose forecast of continued manufacturing challenges sent the semiconductor giant plummeting more than -15%, marking the largest loss among S&P 500 and Nasdaq 100 constituents. Yet rather than cascading into a broader tech rout, the broader technology sector demonstrated resilience and purchasing interest at lower valuations.

Consumer Confidence Provides Critical Support for Tech Recovery

A pivotal turning point emerged from revised economic data that bolstered investor sentiment across risk assets. The University of Michigan revised its US consumer sentiment index upward by +2.4 points to 56.4, reaching a five-month high and exceeding expectations that had anticipated no change at 54.0. This significant improvement in consumer optimism proved especially supportive for technology-oriented equities, given their sensitivity to discretionary spending and economic confidence.

Inflation expectations also retreated meaningfully. The University of Michigan reported that one-year inflation expectations declined to 4.0%, a one-year low, down from the previously reported 4.2%. Similarly, five to ten-year inflation expectations softened to 3.3% from 3.4%. These declining inflation expectations eased concerns about aggressive monetary policy, supporting equity valuations broadly and technology stocks specifically.

Manufacturing activity, while showing modest growth, remained consistent with expectations. The US S&P manufacturing PMI rose slightly to 51.9, marginally below expectations of 52.0 but confirming continued expansion in the industrial sector.

Interest Rate Markets React to Shifting Economic Signals

Bond markets responded dynamically to the improving economic data and moderating inflation expectations. March 10-year Treasury notes advanced by +2 ticks, with yields declining -0.6 basis points to 4.239%. The initial pressure on bond prices from crude oil’s +2% surge reversed course as inflation concerns receded, allowing fixed income securities to recover from early selling.

The 10-year German bund yield climbed to a three-week high of 2.894%, advancing +0.6 basis points, while the UK 10-year gilt yield reached a 2.5-week high of 4.494%, up +2.0 basis points. European economic data proved mixed, with the Eurozone manufacturing PMI rising to 49.4 (+0.6) and exceeding expectations of 49.2, while UK manufacturing PMI jumped to 51.6 (+1.0), marking the fastest expansion pace in 17 months and surpassing expectations of 50.6.

Interest rate futures reflected minimal expectations for imminent monetary policy adjustments. Swaps indicated zero probability of a +25 basis point rate hike by the ECB at its February 5 policy meeting. Meanwhile, the Federal Reserve futures market was pricing in merely a 3% likelihood of a -25 basis point cut at the January 27-28 FOMC gathering.

Speculation regarding the next Federal Reserve Chair nomination created mild headwinds for Treasury prices. President Trump’s expressed reluctance to nominate Keven Hassett—viewed as the most dovish candidate—and preference to retain him as National Economic Council director suggested the possibility of a less accommodative nominee like Kevin Warsh, a known hawk and the second-most-likely Fed Chair candidate. Such a development would weigh on longer-duration fixed income securities.

Technology Stocks and Energy Producers Lead Individual Gainers

Beyond the Magnificent Seven, numerous individual equities demonstrated strength in technology-adjacent and other cyclical sectors. Fortinet surged more than +6%, leading S&P 500 gainers after receiving an upgraded rating to buy from TD Cowen with a $100 price target. Booz Allen Hamilton jumped more than +8% following superior Q3 adjusted earnings of $1.77, significantly exceeding consensus of $1.27, while raising full-year adjusted EPS guidance to $5.95-$6.15 from the previous range of $5.45-$5.65.

CSX Corp climbed more than +4% after providing guidance for 200 to 300 basis points of operating margin expansion in 2026 compared to adjusted fiscal 2025 performance. Netflix advanced more than +2% after co-chief executive Peters confirmed to the Financial Times that the company remained on track to secure Warner Bros. Discovery shareholder support for its acquisition proposal of the entertainment conglomerate’s film and television assets.

Energy sector equities gained meaningful ground as crude oil prices surged more than +2% to a one-week high, buoyed by geopolitical tensions and supply concerns. President Trump reignited rhetoric regarding potential military action against Iran’s senior leadership in response to its violent treatment of protesters. Additionally, the Financial Times reported that the US government was considering curbing dollar supplies for Iraqi oil sales to pressure Iraq’s political leaders toward forming a government excluding Iran-backed militia groups.

Halliburton, Devon Energy, and Occidental Petroleum each climbed more than +2%, while APA Corp, ConocoPhillips, Exxon Mobil, SLB Ltd, and Valero Energy all advanced more than +1%. The broader energy complex benefited from strong underlying commodity dynamics and geopolitical risk premiums.

Precious metals mining stocks also participated in the market recovery. Gold, silver, and platinum prices each reached fresh record highs, driven by a weaker dollar, persistent geopolitical risks, and renewed concerns regarding potential threats to the Federal Reserve’s independence. These factors enhanced safe-haven demand for precious metals as value stores. Barrick Mining surged more than +2%, while Newmont Mining, Hecla Mining, Freeport-McMoRan, and Coeur Mining each gained more than +1%.

Consumer discretionary stocks demonstrated additional strength, with Clorox climbing more than +2% following its $2.25 billion cash acquisition of GOJO Industries, expanding the company’s portfolio in cleaning and personal care categories.

Market Headwinds and Notable Underperformers

Not all equities shared in the day’s strength. Capital One Financial declined more than -6% after reporting Q4 adjusted earnings of $3.86, disappointing relative to consensus expectations of $4.15. Safehold Inc retreated more than -4% following a Morgan Stanley downgrade to underweight from equal weight with a $14 price target. Entegris Inc and Sherwin-Williams Co each declined more than -1% after receiving neutral ratings and hold recommendations respectively from Seaport Global Securities and Deutsche Bank.

The Dow Jones Industrials Index declined -0.38%, reflecting the underperformance of certain cyclical and financial sector constituents despite the broader market’s resilience. Such divergence underscored the selective nature of the market’s recovery, with technology and energy sectors driving the primary narrative.

Earnings Season Momentum and Market Drivers

Q4 earnings season commenced in earnest during this period, providing fundamental support for equities. Among the initial 40 S&P 500 companies reporting results, 81% surpassed earnings expectations, establishing a positive tone for subsequent reports. According to Bloomberg Intelligence, S&P 500 earnings are anticipated to expand by +8.4% in Q4, while excluding the Magnificent Seven megacap technology stocks, earnings growth is still projected at +4.6%, demonstrating broad-based earnings resilience.

Political developments continued to influence market sentiment. President Trump announced restraint regarding tariff imposition on European nations opposing his Greenland acquisition efforts. NATO Secretary General Rutte characterized breakthrough discussions as focused on Arctic security rather than territorial sovereignty issues. The Supreme Court refrained from issuing rulings on challenges to Trump’s reciprocal tariff framework, deferring such determinations until after a four-week recess, likely delaying any ruling by at least another month.

Forward-Looking Market Assessment

The market’s ability to stage a recovery and for tech stocks to regain momentum reflected the confluence of supportive factors: improving consumer confidence, moderating inflation expectations, positive earnings surprises, and commodity-driven strength in energy and precious metals sectors. As technology equities lead the charge higher, investors appear increasingly confident in the durability of the economic expansion and corporate profit growth trajectory, positioning the markets for potential further gains as the year progresses.