One measure of market breadth recently touched a new high, as financial and industrial names fuel stocks’ climb

The summer stock rally is broadening beyond big tech.

Megacap technology stocks such as Nvidia, Microsoft and Broadcom led the market’s rapid, tariff-spurred selloff earlier this year, only to rebound just as quickly a few weeks later when trade fears eased. Now, with economic fears diminished and optimism growing that the Trump administration will take a milder stance on trade, the recovery has expanded to include stocks across a more diverse group of sectors, such as financials, industrials and utilities.

The number of stocks in the benchmark S&P 500 closing above their 50-day moving average has climbed recently to levels last seen in the fall, before Donald Trump’s election victory launched an end-of-year rally. And in another sign of breadth, a measure that tracks the number of stocks rising versus those declining notched a new high on Friday.

The market is experiencing a lessening of fear.

While the so-called Magnificent Seven tech stocks still hold investors’ attention—and sway over the market—a broader participation in the recovery has helped propel the Nasdaq Composite Index and the S&P 500 to all-time-highs in June. It could also signal that stocks will keep climbing through the summer, analysts say.

“We’ve seen this before: big tech leads and the market follows,” said Adam Turnquist, chief technical strategist at LPL Financial. “It seems like we are dusting off that playbook.”

Wall Street generally views improving breadth as a signal of a healthy stock market and a sustained advance. Whether the trend continues will depend on a few uncertainties still looming in the second half of the year: potential conflict in the Middle East, the path of interest-rate cuts from the Federal Reserve and the final outcome of President Trump’s tariff plans. 

“As long as things can stay stable, then this market is not exhausted by any stretch of the imagination,” said Tom Essaye, founder of the Sevens Report, a market analysis firm. 

Market breadth has improved as investors who missed out on tech stocks’ historic rebound search for new opportunities in different industries, Essaye said. He called it the “FOMO trade,” referencing the acronym for “fear of missing out.”

Others have made longer-term bets in less popular industries. Jamie Cox, a managing partner at Harris Financial Group in Richmond, Va., didn’t increase his proportion of big-tech holdings over the past few months even as prices dipped. But in recent weeks, his strategy—which includes a blend of defense, financial and large-cap international shares—has started to pay off.

“I’m surprised it took this long,” he said. “It’s been a long time coming.” 

Cox, who manages $1.2 billion at Harris, said that, in recent months, he has heard from clients looking to diversify the stocks in their portfolios. “That lends itself to owning different things than just the most effective of the tech stocks,” he said, such as shares of defense contractors Lockheed Martin and RTX Corp. “You buy the less-aggressive, more tried-and-true, boring stocks.”

The recovery hasn’t worked its way through every corner of the market. Small-cap stocks still lag behind major indexes. It might take a significant shift in the outlook to change that, said George Pearkes, macro strategist at Bespoke Investment Group. “We would have to see a change in risk appetite.” 

Some investors think that a confidence boost could come sooner than expected. Eric Teal, chief investment officer at Comerica Wealth Management, said he is adding midcap, small-cap and even microcap companies. He is buying shares of domestic banks that he thinks won’t be affected by future tariffs, and said the Fed’s rate cut could also boost smaller firms. 

“The broadening out that we’ve seen over the last number of months is not something that’s going to be short-lived,” Teal said. 

It is unlikely that the market’s biggest tech names will fade into the background soon, analysts said. Optimism for artificial intelligence, which powered tech stocks’ ascendance to new highs, is still top-of-mind for professional and individual investors alike. 

But as tech shares have rebounded, so have valuations: Some large-cap names traded at more than 30 times their expected earnings over the next year last week, compared with an S&P 500 average of about 22 times. 

Those rich prices could be another nudge for traders to start snapping up shares in different industries, said Brian Buetel, a managing director at UBS Private Wealth Management. “Nobody disagrees that the Mag Seven are just extremely expensive,” he said. “People forget there are sectors of the market that are on sale—that are cheap.”