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Fund Flows Drive Stocks, Tech Takes Backseat
12 Dec
Summary
- Hedge funds bought stocks benefiting from lower interest rates.
- Tech-heavy Nasdaq Composite closed lower while Dow and S&P 500 hit records.
- Investors are prioritizing fund flows over tech giants like Apple and Meta.
Large hedge funds and money managers have recently purchased stocks that stand to benefit from decreased interest rates, according to market analysis. This strategic pivot, occurring after the Federal Reserve implemented its third consecutive rate cut, has led to a notable preference for sectors such as homebuilding, retail, banking, industrials, and transportation over major technology companies.
Despite the Dow Jones Industrial Average and the S&P 500 achieving record closing highs, the Nasdaq Composite, heavily weighted with technology stocks, finished the trading day in negative territory. Market watchers observed that hedge funds, acting in unison, created a significant momentum that made it costly to oppose by buying into the tech sector.
Individual tech stocks like Apple and Meta are not seen as direct beneficiaries of rate reductions. Apple faces criticism for its spending on artificial intelligence compared to peers, while Meta's stock performance is tied more to its earnings reports. Tesla's valuation is also seen as diverging from traditional auto industry metrics due to its focus on AI and energy storage, indicating that fund flows are the primary market driver.
