US stocks "big reversal in the last 20 minutes", but Bank of America still says: it's time to switch, tech stocks are going to "suffer"

On the last day of May, the US stock market once again experienced intense volatility. The three major stock indexes suddenly plunged collectively, with chip stocks falling by more than 3% at one point. However, rebound in energy stocks and other sectors towards the end of the day, coupled with bargain-hunting funds entering the market, helped the S&P 500 and Dow Jones stop their two-day decline.

On Friday, the S&P 500 index rebounded towards the end of the day, closing up nearly 1%. Dragged down by tech giants, the index had previously fallen by nearly 1%. In May, the S&P rose by 4.8%, marking its best monthly performance since February.

Currently, the US stock market is mainly dominated by a few tech giants, with many investors betting that they will continue to lead the market higher. However, Bank of America strategists believe that as market breadth (the number of rising stocks) improves, "value stocks" may start to outperform "growth stocks" represented by tech stocks.

Bank of America stated that investors betting on tech stocks may face a difficult period and could become the next "painful trade" for tech stock investors.

Dan Wantrobski, an analyst at Janney Montgomery Scott, said:

The leaders have turned into losers. We see some initial support in leading areas being broken. Overall, we still expect the US stock market to continue to experience volatility after June.

Matt Maley of Miller Tabak stated that when there is "rotation" in the stock market, it is usually seen as a positive signal. However, over the past two weeks, there has been repeated rotation between tech stocks and other stocks, which is actually a negative sign, more like market "choppiness," indicating a lack of clear direction and trend in the market.

This is not necessarily a negative factor in itself, but when it occurs after a decent rebound, it often indicates a weakening upward momentum. Therefore, it often accompanies some degree of pullback in the (market), even if it is only a mild one.

Fawad Razaqzada of City Index and Forex.com stated that tech stocks are currently overvalued and may experience a correction.

After months of significant gains without new positive catalysts, a correction is not surprising.

Meanwhile, favorable news of inflation cooling down, a key indicator favored by the Federal Reserve, came as inflation slightly slowed down as expected by Wall Street compared to the previous month. The US core PCE price index for April increased by 0.2% month-on-month, marking the slowest growth rate this year, with the index's year-on-year growth rate slowing to nearly 2.8%, hitting a three-year low Traders believe that for the data-dependent Federal Reserve, this report should be "not too bad", "slightly constructive", and "slightly dovish". Nick Timiraos, also known as the new "Fed News Agency", commented that the report largely meets market expectations and is unlikely to change the Fed's current wait-and-see stance