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Buy the dip! What was expensive is now cheap, and what was cheap has rallied. As a result, investors are moving from rotation into buying tech names that were deeply beaten down in 2026. The Nasdaq Composite is rising. If it can close the five-day period in the green, it will finally snap its longest five-week losing streak in four years.
Dynamics of US equity indices
The forward P/E on Walmart has climbed to about 45, marking a 26-year high. By contrast, Amazon's P/E has plunged to a 17-year low of around 25. NVIDIA's multiple recently slid to its lowest level since the panic over the White House's plan for peak tariffs back in April.
Late in 2025, lofty tech valuations and fears that massive AI investments would not pay off sparked a rotation out of mega-caps. Investors sold the Magnificent Seven and increased exposure to more economically sensitive names. The recent pause in that rotation, driven by strong US macro data, shows the shift is cooling.
Indeed, stronger-than-expected durable goods orders, industrial production rising to its highest in almost a year, and housing starts hitting a five-month high should have boosted demand for small-cap stocks. In practice, the Nasdaq Composite looks no worse than the Russell 2000.
Traders remained unfazed by the unexpectedly hawkish stance taken in the January FOMC minutes. A few officials pushed to include language suggesting the Fed could raise the funds rate again if inflation fails to slow. That rhetoric strengthened the US dollar and pushed Treasury yields higher. Yet, the S&P 500 barely blinked. Investors remain calm. The futures market still anticipates two rate cuts this year, with about a 40% chance of a third.
Dynamics of S&P 500 and moving averages
The broad index still has a cushion. A bounce from the key dynamic support in the form of the 100-period moving average, combined with evidence that US selling was overdone, has encouraged bulls.
Data from the US Treasury showed that foreign investors bought a net $720 billion of US equities in 2025, up 134% versus 2024.
Technically, the S&P 500 tested the pivot level of 6,910 and the dynamic supports represented by the moving averages on the daily chart. The first attempt failed, but a successful re-test would allow traders to add to their long positions opened at 6,815.
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