The "Seven Giants" lose momentum as other companies catch up in the S&P 500 Index

According to the Zhitong Finance and Economics APP, the U.S. stock market has experienced a strong rebound after a summer slump, but in the past month of turbulence, the "Big Seven" seems to have lost its leading position in the market.

Since the beginning of the third quarter, the stock performance of these mega-cap companies has lagged behind the other 493 companies in the S&P 500 index. According to BMO's Chief Investment Strategist Brian Belski, this suggests that these giant stocks may underperform other stocks in the S&P 500 index in a quarter for the first time in nearly two years.

Belski stated that the S&P 500 index can approach within 1% of its historical high without the leadership of tech stocks or mega-cap companies, which should enhance investors' confidence in the sustainability of this rebound.

For over a year, market skeptics have been concerned that the stock market is too concentrated in a few overvalued mega-cap stocks. As the gap between market winners and losers has recently become more extreme, many Wall Street strategists suggest investors shift funds to cheaper sectors in the market, such as value stocks, cyclical stocks, and small-cap stocks.

However, this does not mean that the "Big Seven" cannot regain their leading position in the six weeks before the end of this quarter.

In fact, as the stock market recovery has accelerated over the past two weeks, the gains in tech stocks have expanded. This week, the tech-heavy Nasdaq Composite Index exited the correction territory at a record pace.

According to FactSet data, since the market started rebounding on August 7th, tech darling NVIDIA (NVDA.US) has led the index with a nearly 30% increase.

Tech stocks still need some time to return to their July highs. Shortly after the Nasdaq Composite Index hit a record closing high on July 10th, investors suddenly sold off mega-cap tech stocks and shifted to small-cap stocks and other previously unpopular sectors in the market. As of Wednesday, the Nasdaq index is about four percentage points away from its historical high.

Even if the "Big Seven" can rise again, more and more industries have outperformed the S&P 500 index in recent performance, as investors increasingly bet on stocks expected to benefit from the Fed rate cuts.

According to FactSet data, defensive stocks such as utilities, healthcare, and consumer staples have seen a broad rebound in August along with cyclical industries like finance. BMO found that nearly 300 stocks in the S&P 500 index have outperformed the index since the beginning of the third quarter, the most in nearly two years.

Bulls like Ryan Detrick from Carson Group have long believed that for the S&P 500 index to continue hitting new highs, the number of stocks driving its rise needs to expand. Detrick pointed out in an interview on Tuesday that now, this seems to finally be happening Now the stock market is no longer solely reliant on technology stocks. Seeing these more cyclical sectors taking the lead is a good sign for investors