By Lewis Krauskopf

NEW YORK (Reuters) – With earnings season in full swing, bullish investors are hoping solid corporate results will stem a slide in tech stocks that has cooled this year’s rally in U.S. stocks.

The S&P 500’s technology sector has fallen nearly 6% in just over a week, shedding about $900 billion in market value as rising expectations of rate cuts and a second Donald Trump presidency draw money from this year’s winners and into 2024 languishing sectors.

It fared somewhat better, losing 1.6% in just over a week, with tech’s decline partially offset by big gains in sectors such as financials, industrials and small caps. The benchmark is up more than 16% so far this year.

Second-quarter earnings could help tech regain the spotlight. Tesla (NASDAQ: ) and Google parent Alphabet (NASDAQ: 🙂 and Apple (NASDAQ: ) are set to report next week.

Big tech stocks are “leading the charge, and for good reason,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. “They make money, they grow their profits, they own their place.”

Strong results from market leaders could ease some of the concerns that have prevailed recently, including worries about stretched valuations and progress underscored by impressive gains in stocks such as Nvidia (NASDAQ: ), which rose up 145% this year despite a recent dip.

On the other hand, signs that earnings are flagging or AI-related spending is less than expected would test the narrative of tech dominance that has boosted stocks this year. That could quickly turn into a problem for broader markets: Alphabet, Tesla, Amazon.com (NASDAQ: ), Microsoft, Meta Platforms (NASDAQ: ), Apple and Nvidia accounted for about 60% of the gain of the S&P 500 this year.

Corporate results for market leaders are expected to meet a high bar. The technology sector is projected to grow year-over-year earnings by 17%, and earnings for the communications services sector — which includes Alphabet and Facebook parent Meta — are seen rising about 22%. Those gains would beat the estimated 11 percent gain for the S&P 500 as a whole, according to LSEG IBES.

Anthony Saglimbene, chief market strategist at Ameriprise Financial (NYSE: ), believes many investors were caught off guard by an inflation report earlier this month that saw expectations for a September rate cut by the Fed, sparking a switching to sectors the market has struggled under tighter monetary policy.

The takedown of the technology accelerated this week, after a failed assassination attempt against Trump over the weekend appeared to boost his standing in the presidential race.

In addition, semiconductor stocks were hit hard after a report earlier this week said the United States was considering tighter restrictions on exports of advanced semiconductor technology to China. The Philadelphia SE Semiconductor Index is down about 8% since last week.

“What we advise investors to do is use some of the pullbacks in these sectors as an opportunity to allocate to a longer-term basis,” said Saglimbene, who believes upcoming earnings reports could reduce selling pressure on Big Tech.

To be sure, the broadening of gains elsewhere in the market encouraged some investors about the resilience of the stock rally this year.

In recent trading, the number of stocks that rose compared to those that fell over a five-day period reached the highest percentage since November, according to research by Ned Davis. Historically, when gainers outnumber decliners by at least 2.5 times, as was the case in this recent fortnight, the S&P 500 has rallied an average of 4.5% over the following three months, according to NDR. “The risk is that large caps pull the popular averages lower, but history shows that strong range improvements have been bullish for stocks moving forward,” Ned Davis strategists said in a report Wednesday.