Tech Stocks' Cheap Prices Spark Earnings-Led Rally Amidst Bond Yield Surge

Goldman Sachs strategists argue that the "Magnificent Seven" tech stocks, including Apple, Microsoft, Amazon, Alphabet, Nvidia, Tesla, and Meta Platforms, are currently trading at their cheapest valuation relative to the median stock in over six years. The next 12-month price-to-earnings ratio for these stocks has fallen to 27 from 34, while the S&P 500 has seen a narrower decline. The underperformance of these tech stocks can be attributed to the rise in long-term yields. However, the upcoming third-quarter earnings season is expected to bring 11% sales growth for the largest tech companies, compared to just 1% for the S&P 500 as a whole.