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STOVALL: TECH MAY NEED MORE TIME TO DIGEST RECENT GAIN

Sometimes a sector advances so far ahead of the rest of the market that it needs time to consolidate while others catch up. According to Sam Stovall, chief investment strategist at CFRA, that may be what's happening with technology stocks.

In a note on Monday, Stovall said that when the S&P 500 .SPX hit its latest record high on June 2, 2026, the S&P 500 Information Technology sector .SPLRCT was trading more than 27% above its 200-day moving average—more than double its long-term average premium.

Since then, the broader market has cooled. Through Friday's close, the S&P 500 was down about 2% from its June high. Yet beneath the surface, leadership has broadened considerably, with six of the index's 11 sectors and roughly two-thirds of the 153 sub-industries in the S&P Composite 1500 outperforming the benchmark.

Even as the S&P 500 stalled, however, the market's semiconductor-related groups kept charging ahead well into June. The S&P 1500 Semiconductor Equipment and Semiconductors indexes stretched to about 80% and 32% above their respective 200-day moving averages—far above their historical average premiums of roughly 6%.

Although both groups have pulled back recently, they remain extended. As of Friday’s close, semiconductor equipment was still trading about 34% above its 200-day average, while semiconductors remained roughly 14% above theirs. The technology sector as a whole was also about 11% above its long-term average differential.

So what's Stovall's takeaway?

In his view, tech and some of its biggest recent winners may simply need more time to digest their outsized gains before the longer-term uptrend can resume. While that could mean additional near-term softness, CFRA continues to maintain a positive long-term outlook for the technology sector and many of the industries within it.

(Terence Gabriel)

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