US stocks rallied earlier this week after the Trump administration announced that it would delay tariffs on many items, including smartphones, laptops and toys that are made in China, until mid-December.
Technology stocks rallied the most, with Apple (AAPL - Free Report) , leading the gains. Technology sector has the highest revenue exposure to foreign markets—more than 58%, and therefore it remains vulnerable to trade conflicts and global growth slowdown.
Tech is still the best performing sector this year, up more than 25%, while the S&P 500 has gained about 14%. Four tech giants—Microsoft (MSFT - Free Report) , Apple, Amazon (AMZN - Free Report) and Facebook (FB - Free Report) --accounted for 19% of the S&P 500’s total return through July 18 this year, per WSJ.
Tech earnings were better than expected with 78.7% companies beating EPS estimates and 63.8% beating revenue estimates, per Zacks Earnings Trends.
Investors continue to pour money into these stocks despite stretched valuations due to excellent growth potential, particularly from areas like cloud computing and artificial intelligence. Further, high quality stocks tend to perform better than others during economic downturns.
To learn more about the Technology Select Sector SPDR Fund (XLK - Free Report) , the Vanguard Information Technology ETF (VGT - Free Report) and the iShares U.S. Technology ETF (IYW - Free Report) , please watch the short video above.
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