The Federal Reserve's interest rate cut and the optimistic expectations for the economyBut after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.have reignited risk appetite. Since September, US technology stocks, which experienced a tumultuous summer, have started a rebound. Overnight, Nvidia hit a new high. But whether tech stocks can return to their dominant position, and whether the rotation in the US stock market can continue, this earnings season is very crucial.

On Monday, Nvidia rose 2.4%, closing at $138.07, surpassing the historical high reached in July, with a market cap of $3.39 trillion, approaching Apple's market cap of $3.5 trillion, the 'global stock king'. Over the past month, Nvidia has accumulated a gain of over 18%.

Nvidia's return to highs marks a shift in the narrative logic of the US stock market.

This summer, events such as disappointing AI financial reports, the reversal of carry trades, and the unexpectedly cold non-farm payroll data raised expectations of interest rate cuts, leading to a major correction in tech stocks. The US stock market experienced style rotation, with tech stocks, which have long been leading the US stock market, being sold off, while previously less favored sectors such as financials, industrials, defensive sectors, and small-cap stocks started to rise.

Since the Fed's interest rate cut in September, tech stocks have been "regrouping." Data shows that IT and communications services were the two worst-performing sectors in the S&P 500 index in the third quarter, but since the September FOMC meeting, they have become one of the best-performing sectors, with the IT index rising by over 7%.

Is this rebound the beginning of technology stocks regaining dominance in the US stock market, or is it a short-term rebound in the ongoing rotation of US stocks? The market is closely watching the current US earnings season.

This earnings season will influence the style of the US stock market.

Analysts have varying views on the rebound of technology stocks.

Dec Mullarkey, Managing Director of SLC Management, believes that the rotation from large-cap stocks to other stocks may have already ended, stating: "Investors shifted to defensive positions before the Fed meeting, but since then the Fed's tone and subsequent data have been very favorable to risk appetite."

However, Charles Schwab's Senior Investment Strategist Kevin Gordon is not as optimistic:

"I'm not convinced yet that this is a clear pivot back to tech dominance... It seems more like a catch-up because sectors like finance and industrials had already set new highs before tech and large caps, allowing tech to regain some lost ground, especially as this sector often performs well during Fed rate-cut cycles."

As Gordon mentioned, unlike the past tech sector outperformance, in this tech rebound, over 60% of stocks in the S&P 500 index have seen increases, including cyclical sectors like industrials and energy.

The upcoming earnings reports will determine whether the rotational trend in the US stock market can continue.

Last week, jpmorgan and Wells Fargo & Co's better-than-expected performance propelled bank stocks to their highest levels since the Silicon Valley bank crash, marking a strong start to the third-quarter earnings season and boosting optimism about the US economic outlook, leading to a strong rise in small-cap stocks.

However, the ​bonds market has not been as optimistic as the ​stocks market, with yields steadily rising and the yield on the 10-year US Treasury hovering at the 4% level. Analysts believe the divergence between stocks and bonds will not last forever; once disproved, the wrong side will see a significant correction.

This week, the market will see financial and consumer giants like Goldman Sachs and Johnson & Johnson releasing their financial reports. In the following week, the financial reports of large technology stocks will be unveiled one after another, with small cap stocks' reports set to be densely released in the next two weeks.

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