The Federal Reserve's interest rate cut and optimistic expectations for a soft economic landing have reignited risk appetite, leading to a rebound in US technology stocks since September after a turbulent summer. Nvidia set a new high overnight. However, whether technology stocks can regain dominance and whether the rotation in US stocks can continue is crucial during this earnings season.

On Monday, Nvidia rose by 2.4%, closing at $138.07, surpassing the historical high it reached in July, with a market value of $3.39 trillion, approaching Apple's market value of $3.5 trillion, known as the "king of global stocks." Over the past month, Nvidia has rebounded by 18%.

Nvidia's return to its high point marks a shift in the narrative logic of US stocks.

This summer, events such as AI's poor financial reports, the reversal of carry trade, and the unexpected non-farm payrolls report that raised expectations for interest rate cuts led to a major adjustment in technology stocks. There was a style rotation in US stocks, with technology stocks, which have long dominated the US stock market, being sold off, while financial, industrial, defensive sectors, and small-cap stocks, which were previously out of favor, began to rise.

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However, since the Federal Reserve's interest rate cut in September, technology stocks have "regrouped." Data shows that IT and communication services were the two worst-performing sectors in the S&P 500 Index in the third quarter, but since the September FOMC meeting, they have become one of the best-performing sectors, with the IT index rising by more than 7%.

This rebound is closely watched by the market to determine whether it is the beginning of technology stocks regaining their say in US stocks or just a brief catch-up rally in the ongoing rotation of US stocks.

This earnings season will determine the style of US stocks.

Analysts have differing views on this rebound in technology stocks.

Dec Mullarkey, Managing Director of SLC Management, believes that the rotation from large-cap stocks to others may have ended, saying: "Investors turned defensive before the Federal Reserve meeting, but since then, the Federal Reserve's tone and subsequent data have been very favorable for risk appetite."Schwab Financial Consultants' Senior Investment Strategist Kevin Gordon is not as optimistic:

"I'm not yet convinced that this is a clear shift back to technology stocks' dominance... It seems more like a catch-up, as other sectors such as financials and industrials had already hit new highs before technology and large-cap stocks, and there is room for the technology sector to make up some ground, especially since the sector tends to perform well during the Federal Reserve's rate-cutting cycle."

As Gordon said, unlike the past where technology stocks were the "only ones rising," in this technology rebound, more than 60% of the stocks in the S&P 500 have risen, including cyclical sectors like industrials and energy.

The release of earnings reports will determine whether the rotation in U.S. stocks can continue.

Last week, better-than-expected earnings from JPMorgan Chase and Wells Fargo pushed bank stocks to their highest level since the collapse of Silicon Valley Bank, and the strong start to the third-quarter earnings season also increased optimism about the U.S. economic outlook, with small-cap stocks showing strong gains.

However, the bond market is not as optimistic as the stock market, with yields steadily rising, and the yield on the 10-year U.S. Treasury hovering around the 4% level. Analysts believe that the divergence between stocks and bonds will not last forever, and once disproven, the wrong side will see a significant correction.

This week, the market will see earnings reports from financial and consumer giants such as Goldman Sachs and Johnson & Johnson, and in the coming week, earnings reports from major technology stocks will be released one after another, followed by a dense release of small-cap stock earnings in the next two weeks.