The technology sector is leading the markets higher – but three other sectors have joined: Morning Brief

This is the conclusion of today's Morning Brief, which you can read Sign in Delivered to your inbox every morning, along with:

There's no doubt that Big Tech is leading the bull market – but it has company.

Although the major indexes are barely in the green this October, they were buoyed by third-quarter results from Bank of America (BAC) and Goldman Sachs (GS), which reported significant increases in investment banking fees.

More importantly, the so-called “fins,” along with three others – technology, consumer discretionary and industrials – have outperformed the S&P 500 since the Japanese yen-induced panic on August 5. All four sectors are up about 15%, with a slight lead over the technology sector. (The low is important from a technical perspective because it marks the bottom of the biggest decline of the year – a normal 8.5%).

It may seem familiar – and perhaps a little unsettling – that after the concentrated hand-wringing over the Magnificent Seven, “technology is once again leading the way.” But unlike other phases of this bull market – which is now two years old – the tech industry has a lot to offer thanks to the flow of money or rotation into other sectors.

It's a process as old as public markets. As the godfather of technical analysis, Ralph Acampora, CMT quipped, “Sector rotation is the lifeblood of a bull market.”

Ralph's nephew Jay Woods, executive governor of the NYSE and chief global strategist at Freedom Capital Markets, recently joined Stocks In Translation to introduce the concept.

“Money doesn't leave the market, it just flows from one sector to the next and the next,” Woods said, citing the strength of software stocks. He particularly highlighted cybersecurity stocks like CrowdStrike (CRWD) and Cisco (CSCO) — both once-damaged stocks that are now leaders.

Woods reflects on Cisco's journey back and forth to the heights of the dot-com bubble.

“I hate that I like Cisco right now,” Woods said. “I liked it in 1999, and it's exactly where it traded in 1999. This is amazing.”

In fact, today's leadership in the technology sector is in stark contrast to earlier in the year, when Mag Seven shares dominated. Although perennial leader Nvidia (NVDA) is up 30% from its August 5 low, IBM (IBM) is hot on its heels, rising from the ashes of its old tech industry to new records.

Incidentally, more than 20 stocks in the S&P 500 have outperformed Nvidia since the yen's low, led by electric company Vistra Corp. (VST) and United Airlines (UAL) – each up 85% and 70%, respectively.

The story continues

Many of these stocks are simply laggards that came under pressure in the 2022 bear market and fell by the wayside. But even among the overwhelmed, there are still potential winners.

“Set up a 5-year weekly chart of utilities for me. Talk about a nice rounded base and then a breakout,” Woods said, adding, “(These are) not your grandparents’ providers anymore.”

On the Yahoo Finance podcast Stocks in translationYahoo Finance Editor Jared Blikre cuts through the market chaos, loud numbers and hyperbole to bring you key conversations and insights from across the investment landscape, giving you the critical context you need to make the right decisions for your portfolio. You can find more episodes on our Video Hub or look at yours preferred streaming service.

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