By Isabel Wang
Big Tech has roared back in April. Why it could be your win-win trade during the U.S.-Iran standoff.
Technology stocks' winning streak is facing a big test this week.
The rally powering the stock market back to record highs has a surprisingly simple engine: When everything else looks fragile, Big Tech is the trade.
The U.S.-Iran standoff in the Middle East has done little to derail stocks' seemingly relentless march back toward all-time highs in April. The S&amp;P 500 SPX and the Nasdaq Composite COMP have surged for four consecutive weeks, according to Dow Jones Market Data.
Tech stocks are operating against a &#34;heads I win, tails I win&#34; backdrop, said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions. That's because robust tech earnings should cheer investors, even if the U.S. economy starts looking like it's faltering.
And if the Iran war escalates, tech also should be more insulated from higher oil prices (CL00) (CL.1) (CLM26) than other parts of the market, Melson told MarketWatch via phone.
Tech stocks, especially the so-called Magnificent Seven, are sitting in a rare sweet spot. Valuations are finally more attractive on a relative basis, while the companies' dominance in artificial intelligence keeps them firmly at the center of the market's most important growth story. That combination not only underscores their leadership but also speaks to the market's growing dependence on a narrow set of technology names.
The Roundhill Magnificent Seven ETF MAGS - which tracks Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL) (GOOG), Nvidia (NVDA), Amazon.com (AMZN), Tesla (TSLA) and Meta Platforms (META) - has popped nearly 15% so far in April, rebounding after two consecutive monthly losses. Its valuation, measured by forward price-to-earnings ratio, fell to its lowest level in almost a year on March 30, before recovering slightly in the weeks that followed.
Despite the month-to-date rally, the MAGS ETF last week was still trading below its priciest level from earlier in the year, according to Dow Jones Market Data.
&#34;What we've seen in April is we have attractive valuations in tech stocks, we have this cyclical recovery going into question due to the war, and then positive fundamentals on the AI ecosystem,&#34; said Kevin Shea, director and senior equity strategist at BNY Wealth. &#34;Large-cap tech is now receiving a bid and outperforming.&#34;
And in the case of megacap technology companies' cloud businesses, demand remains robust and largely independent of geopolitical developments, so any additional capacity brought online could be effectively absorbed without delay, Shea added.
Their primary growth drivers are &#34;highly secular rather than macro-dependent,&#34; he said, and that is positioning Big Tech as a relatively strong &#34;haven&#34; investment amid geopolitical turmoil.
Still, this optimism largely hinges on whether earnings from five of the Magnificent Seven hold up when they deliver quarterly results later this week. That may test whether the record-setting rally in the broader stock market is justified, or just another head fake in a market still searching for stability in a turbulent year.
Wednesday afternoon will see quarterly results from Alphabet, Microsoft, Amazon and Meta, followed by Apple on Thursday.
Matt Weller, head of market research at StoneX, said in a Friday client note that the most important theme to watch from this tech earnings season is the shift away from pure AI and data-center capital expenditures and toward the return on those investments.
Wednesday also features the Federal Reserve's latest policy decision, as well as Fed Chair Jerome Powell's final press conference before his term expires on May 15.
See: Trump's Justice Department drops its probe into Fed's Powell, paving the way for Warsh's confirmation
Policymakers are widely expected to maintain the current interest-rate range of 3.50% to 3.75%. But without an update to the central bank's Summary of Economic Projections, the Fed meeting this week could prove relatively &#34;uneventful&#34; for markets, said Tony Rodriguez, head of fixed-income strategy at Nuveen.
Yet all eyes will be on whether Kevin Warsh, President Trump's nominee to succeed Powell as Fed chair, can secure Senate confirmation ahead of May 15. The U.S. Justice Department on Friday said it would end its probe into Powell, clearing a major roadblock to Warsh's confirmation.
U.S. stocks finished the week mostly higher on Friday, with the S&amp;P 500 and Nasdaq closing at fresh records. The Dow Jones Industrial Average DJIA was off 0.4% for the week, but the S&amp;P 500 rose 0.6% and the Nasdaq advanced 1.5% last week, according to FactSet data.
-Isabel Wang
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
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Big Tech stocks are thriving amid geopolitical tensions, particularly the U.S.-Iran standoff, with the S&P 500 and Nasdaq reaching record highs. The Magnificent Seven ETF, tracking major tech companies, has gained nearly 15% in April, benefiting from attractive valuations and strong AI growth. Upcoming earnings reports from key tech firms will be crucial in determining the sustainability of this rally. Additionally, the Federal Reserve's policy decision and potential leadership changes are also significant market factors to watch this week.

- The ongoing U.S.-Iran standoff has not significantly affected the rise of Big Tech stocks, which are currently favored by investors due to robust earnings and insights from AI technology.  
- The Magnificent Seven ETF has increased nearly 15% in April, supported by attractive valuations and a cyclical recovery amidst geopolitical uncertainty, positioning Big Tech as a strong investment option.  
- Upcoming quarterly results from major tech companies like Alphabet and Microsoft are crucial to validating this rally, while the Federal Reserve's interest rate decisions could also influence market stability.

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Big Tech is the bull market's win-win trade right now - making this week crucial