U.S. Tech Momentum Stocks Post Largest Single-Day Rally in History

Author: Long Yue

U.S. tech momentum stocks staged a sharp rebound on Tuesday, July 21. Morgan Stanley’s TMT momentum factor surged over 12% in a single day, marking its largest one-day gain on record, surpassing any single-day performance during the 2000 dot-com bubble. The Goldman Sachs High Beta Momentum Long Index (GSCBHMOM) rose approximately 8.5%, posting its strongest single-day gain since April 2025; the High Beta Momentum Long-Short Index (GSPRHIMO) jumped 9.5%, its strongest performance since 2021 and nearing the highest levels seen since 2003.

The Nasdaq Composite rose approximately 1.3% today, leading the three major indices. The semiconductor sector was the primary driver—the Philadelphia Semiconductor Index surged 4.6% on the day, and the VanEck Semiconductor ETF rose about 4.5%. Micron Technology climbed over 10%, Intel rose approximately 8.6%, SanDisk increased about 14%, Cerebras Systems jumped about 18%, and Cipher Mining rose over 11%.

This rebound occurred after three consecutive trading days of declines and following a cumulative 33% drop in momentum stocks.

To understand this rebound, it’s important to first recognize how deep the previous decline was.

According to Goldman Sachs data, high-beta momentum stocks have plunged 33% over just a few trading days, marking one of the most severe drawdowns since the dot-com bubble burst. The Goldman Sachs High-Beta Momentum Index briefly fell below its 200-day moving average, hitting its lowest level since January this year, with oversold conditions reaching their most extreme level since August last year.

The deeper the decline, the greater the rebound—this is the fundamental logic of the market.

This rally has largely been a short squeeze. Investors who had heavily shorted momentum stocks, particularly speculative traders from South Korea and Japan, suffered heavy losses over the past two weeks—South Korea’s market even saw widespread margin calls that severely impacted local retail investors. As these short sellers were forced to cover their positions, buying pressure created a self-reinforcing upward spiral.

Zacks Investment Research analysis noted that Micron Technology previously broke below the neckline of a head-and-shoulders pattern on its daily chart, indicating a bearish technical formation. However, on Tuesday, the stock surged more than 10%, reclaiming its position above the neckline. "False breakouts often trigger sharp reversals, as late-arriving short sellers become trapped."

The rebound numbers look impressive, but the underlying structure is not healthy.

BTIG strategist Jonathan Krinsky analyzed that Tuesday’s overall volume was light, with SPY, QQQ, and S&P 500 spot volumes each 20% to 30% below their 20-day averages. Meanwhile, the S&P 500 rose nearly 1% on the day, yet the number of declining stocks still exceeded the number of advancing stocks—marking the most frequent divergence between price and market breadth this year, with this pattern recurring again on Tuesday.

According to Goldman Sachs trader data, overall exchange volume is about 17% below the 20-day average, with market makers' book liquidity at just $6.83 million, and market activity scoring only 3 out of 10.

In other words, this rally resembles a concentrated surge by a few heavily weighted stocks rather than a broad-based recovery.

Bloomberg macro strategist Michael Ball analyzed, "It is still too early to declare the adjustment over." Demand for put options on semiconductor ETFs and prior AI standout stocks remains elevated. The negative Gamma exposure of the Nasdaq, semiconductor ETFs, and related individual stocks means market makers will chase price movements rather than dampen volatility—amplifying both upward and downward moves.

Not everyone is optimistic about this rebound.

Jonathan Krinsky of BTIG explicitly warned to "fade the rally." He previously predicted that the momentum stock rebound would encounter strong resistance in the 730 to 750 range, and Tuesday’s rebound brought GSCBHMOM right to the lower end of that resistance zone.

Krinsky said: "Extreme volatility, combined with historic stock-specific divergence, is a signal that the market is undergoing a broad correction." He expects high-beta momentum stocks to begin stalling after entering the core of the resistance zone from Wednesday to Thursday.

Historical data shows that since 1999, the high-beta momentum long index has experienced a single-day gain of more than 7% above its 200-day moving average only 10 times. Three of these occurred this year, three in early 2021, and three in early 2000. Krinsky noted that this data "highlights both the rarity of this rally and the continued presence of statistical patterns echoing the 1999–2000 period."

Unlike BTIG’s cautious stance, Goldman Sachs and UBS both believe this momentum sell-off is nearing its end and recommend investors seize the opportunity.

Julia Mensch of Goldman Sachs noted in her report that Goldman Sachs had previously indicated last week that the momentum sell-off was "entering its later stages." She wrote: "With positions significantly unwound (Goldman Sachs prime brokerage data shows momentum exposure at the 64th percentile over the past year and the 93rd percentile over the past five years), and no new fundamental catalysts driving this sell-off, we believe momentum has room to revert toward its long-term trend, making this a potential opportunity to increase momentum exposure or buy AI stocks on dips."

Michael Romano, Head of Stock Derivatives Sales at UBS Hedge Fund, also expressed a similar view in a client report, stating that improved fundamentals in AI represent a buying signal. However, he advised investors to "build positions gradually rather than going all-in at once."

Romano wrote: "Momentum de-risking is and remains a compelling assessment. Dollar-cost averaging is a prudent approach." He expects momentum selling to bottom out by the end of July (if it hasn't already), and stated: "Once the tide turns, I expect liquidity to drive prices into an overshoot."

However, Goldman Sachs has also maintained a cautious stance—given the recent high volatility and the密集 earnings season, Goldman Sachs recommends that investors gain exposure through "limited-loss structures" rather than holding long positions directly.

The sustainability of this rebound largely depends on this week's earnings reports.

According to Reuters, 113 S&P 500 companies—representing approximately 18% of the S&P 500’s market capitalization—reported earnings this week. Among them, Alphabet’s (GOOGL) earnings were regarded as “the most important data point of the week,” with markets closely watching its full-year 2026 capital expenditure guidance—widely expected to be raised, offering key insights into the trajectory of AI spending.

Adam Turnquist, Chief Technology Strategist at LPL Financial, said: "The current focus is not just on the total amount of capital expenditure; the next area of attention will be return on investment and the quality of spending, which we believe will become a central issue in the second half of the year."

He also noted: "We expect the semiconductor sector to remain volatile as overbought conditions need to be absorbed, profit-taking pressure emerges, and crowded positions are unwound. From a fundamental standpoint, we see no material changes."

According to Reuters, as of now, 66 S&P 500 companies have reported earnings, with approximately 88% surpassing analyst expectations. 3M (MMM) rose over 9% in a single day, and General Motors (GM) rose about 5%, both boosted by better-than-expected results.

While the stock market is celebrating, the bond market is issuing warnings.

U.S. Treasury yields rose across the board today, with the two-year yield climbing 5 basis points and the 30-year yield rising 2 basis points, pushing long-term yields to their highest level in two months and erasing the bond gains from last week’s below-expectations inflation data.

Oil prices are one of the driving factors. Brent crude futures closed above $90 per barrel for the first time since June 11. Tensions in the Middle East continue to escalate—Houthi forces in Yemen have announced a blockade of the southern entrance to the Red Sea, causing two tankers carrying Saudi crude to turn back. Data from Kpler’s MarineTraffic shows that even before the blockade was announced, cargo volumes passing through the Bab el-Mandeb Strait had declined by 34% over the past two weeks.

Izaac Brook, interest rate strategist at RBC Capital Markets, said: "Today's market movement is primarily the result of continued increases in energy prices. Interest rate volatility has been amplified by breaks through closely watched technical levels—the 2-year yield at 4.20% and the 10-year yield at 4.60%—along with the typically low liquidity of summer trading conditions."

Cameron Crise of Bloomberg warned that long-term bond yields are at a critical point where 5% could shift from resistance to support, with the next clear target at 5.5%—“This would hit the stock market, especially when stronger-than-expected economic growth pushes yields higher and negatively impacts equities.”

Kevin Boova, Head of IG Credit at Goldman Sachs, also warned that credit spreads for mega-cap tech companies have reached record highs, saying, "The mega-cap cloud/AI/data center sector feels vulnerable again."