ZACKS·2026-02-18 17:47Market Sentiment and Trends - The first two months of the year highlighted a shift in investor sentiment, with a rotation from high-growth tech stocks to more defensive sectors like consumer staples and utilities, leading to underperformance in tech-heavy indices such as the Nasdaq 100 [1][2] - The tech sector, after years of growth driven by AI and low interest rates, faced profit-taking due to fears of rising investments and regulatory scrutiny [2] Seasonal Factors and Economic Indicators - The March-April timeframe is historically positive for equities, suggesting a potential pivot back to risk-on sentiment as tax refunds and resilient earnings could inject liquidity into the market [4][5] - Tax refunds are projected to average $2,290, a 10.9% increase, potentially adding $50-$100 billion in liquidity, which could boost Q1 GDP by 0.5%-0.8% [6] Earnings Outlook - Analysts project a robust outlook for S&P 500 earnings in 2026, with an expected annual growth of 12.1%, marking three consecutive years of double-digit expansion, primarily driven by tech and communications services [8] - The tech sector remains a key driver of earnings growth, with recent earnings results indicating that its fundamental story is intact, setting the stage for a potential rebound [7] Stocks to Watch - Nvidia (NVDA) is highlighted as a stock to watch, with a recent deal with Meta Platforms for chip supply, and upcoming earnings expected to show over 70% growth year-over-year, with revenues projected to rise nearly 67% to $65.56 billion [10][14] - Palantir (PLTR) has been upgraded to Outperform by analysts, with expectations of 78.7% growth in earnings per share and 61% higher revenues, indicating a strong long-term uptrend [15][16] Conclusion - The tech sector is viewed as recalibrating for sustainable growth, with catalysts including positive earnings revisions, post-tax season liquidity, and favorable seasonality, suggesting a strong potential for further gains in the current bull market [18]