Tech stocks are booming again. Can the rally last?

Good morning.

U.S. futures are again mixed today. Among the winners so far are bank stocks—well, those bank stocks that are resuming generous dividends. On the flip side, tech futures are taking a bit of a breather after an impressive run for the Nasdaq.

In today’s essay, I look closer at the recent resurgence in tech/growth stocks. Is this a sign the reflation trade is dead? Read on.

Looking at Europe, investors are shaking off delta variant concerns. Markets slipped yesterday as worries that the highly contagious COVID variant, originating from India, would sabotage the crucial summer travel season.

Elsewhere, commodities are gaining again, as is crypto.

Let’s see what else is moving the markets.

Markets update

Asia

• The major Asia indexes are in the red again in afternoon trade, with the Nikkei off 0.8%.
• The Hong Kong stock exchange just notched a record first-half for IPOs, and you can thank a quintet of tech listings for that. In all, new listings amounted to $26 billion since the start of the year.

Europe

• European stocks were modestly higher out of the gates with the Stoxx Europe 600 up 0.5% in the opening minutes. Energy, banks and autos were leading the way higher.
• Travel stocks are up a touch, but underperforming their peers. That’s after the STOXX 600 Travel and Leisure index closed down 4.35% on Monday as fears grow over the spreading COVID delta variant and its impact on summer travel.

U.S.

• U.S. futures are flat this morning. That’s after the S&P 500 and Nasdaq closed yet again in record territory on Monday.
• Shares in Facebook are flat in pre-market trading after soaring nearly 5% yesterday, pushing its valuation over $1 trillion. The reason: a U.S. District judge yesterday threw out two federal cases accusing it of being a social media monopolist.
• One of yesterday’s biggest winners was Intellia Therapeutics. The biotech startup soared more than 50% yesterday on publication of a new breakthrough in the gene-editing CRISPR technology. Fortune‘s Sy Mukherjee has the full story.

Elsewhere

• Gold is down, trading below $1,780/ounce.
• The dollar is up.
• Crude is flat ahead of a big OPEC+ meeting this week, with Brent trading around $74/barrel.
• The crypto rally continues with Bitcoin trading above $35,000.

***

Tech: call it a comeback?

Thursday marks the start of the second-half of 2021. To most humans that will go uncelebrated. But the markets care, and so does Bull Sheet.

One of the more surprising developments as we close out 1H is the comeback of Big Tech. The NYSE FANG+ Index, which, as the name suggests, is an index that includes such Nasdaq 100 giants as Facebook, Apple, Amazon, Google, Netflix, is up 18.3% in the past six weeks as investors pour back into the biggest of momentum stocks. And, the Nasdaq is up five of the past six sessions to notch a series of new record highs. Who would have predicted that a few months ago? Not many.

This isn’t to suggest that the reopening trade is dead, but there are some signs we may be close to hitting the peak-reopening, and that’s got some on Wall Street closely watching the comeback of über growth stocks with particular interest.

BofA Securities measures the recent resurgence here in a chart that measures software stocks verses bank stocks. As you can see, software (growth) stocks are ticking higher vis-à-vis bank (value) stocks once again.

The underlying reason for this reversal may have more to do with headwinds against traditional value stocks than any great shift out of value and into momentum stocks. That’s backed up by the flow numbers.

In the week ending June 24, according to BofA Securities data, investors pulled their money out of both tech and finance (some of that hit would have happened as markets tumbled following the June 15th FOMC meeting), but they pulled more dough out of the latter. (This week’s flow report will give us more insight into where investors are putting their money.)

The markets are divided on whether the recent run in tech stocks has legs. For starters, inflation—reminder: inflation is typically bad for growth stocks—isn’t going away any time soon. But then we also have a looming infrastructure bill that could inject a cool trillion or so into the U.S. economy. That would be a very positive development for Big Tech, particularly if a national broadband upgrade is in the cards. Maybe investors are betting that the Biden Administration will throw some infrastructure love at tech stocks.

Either way, it’s a development to watch—and watch closely.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Lost at sea. Yesterday evening, I counted a dozen empty cruise ships anchored in and around the port of Civitavecchia, outside Rome. They look like ghost ships. Investors too are getting an uneasy feeling, pounding cruise-ship stocks yesterday in U.S. trading.

All the buzz. Shares in loss-making Chinese EV maker, Nio, soared nearly 10% yesterday. One reason? It's become a favorite of meme-stock traders. 🙄

The inflation trade. Yes, there are stocks and whole sectors you should avoid—and others you should consider—in a period of sustained rising prices. Fortune's Jessica Mathews explains what investors should look for should inflation become, you know, not so transitory.

Daily scoop. A reminder that you can stay on top of the news by signing up to Fortune Daily—in your inbox every morning.  

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Market candy

Quote of the day

Every day I see evidence of inflation not being transitory, and I have concern that the Fed is falling behind.

That's Mohamed El-Erian, chief economic advisor at Allianz, giving voice to what a lot of market watchers are thinking. He told CNBC yesterday that the Federal Reserve is underestimating real inflation, and that a policy misstep here could lead to recession.