The market has seen a shift in tone recently, with the AI trade recovering and cyclical stocks catching a bid. This change in momentum is evident in various data points, including better ADP and ISM services numbers, rising interest rates, and improved performance in speculative growth stocks. The VIX index has also seen a decline, but there are still some smidcap earnings dislocations to be aware of. Within the tech sector, semis have outperformed software by 350bp, while regional banks have led the way in terms of strength. Despite some negative overnight activity, Chinese ADRs are also showing signs of improvement.

In terms of high-touch flow, hedge funds are net buying, with a preference for Mega Caps over Tech stocks. However, there is better liquidity for sale in Tech overall, driven by earnings stories. It’s important to keep these trends in mind when making investment decisions.

Overall, the market appears to be recovering from recent corrections, with a focus on cyclical stocks and improved sentiment. As always, it’s crucial to stay informed and adapt to changing market conditions.