The Dow Jones Industrial Average breaks 48,000 for the first time! With value returning and technology cooling down, how far can this round of style switching in the U.S. stock market go?

Recently, a rare style divergence has emerged on Wall Street. The Dow Jones Industrial Average broke through the 48,000-point mark for the first time on Wednesday, setting a new historical high for the 17th time this year, while the Nasdaq Composite Index has continued to decline. Over the past two days, the Dow has outperformed the Nasdaq by 2.38 percentage points, marking the largest two-day relative performance advantage since February. Healthcare and industrial stocks have surged, offsetting the weakness in technology stocks, indicating a shift in market style.

The anticipated end of the U.S. government shutdown served as a catalyst for the market's rise on Wednesday. Investors expect that air travel restrictions will be lifted and government employees will regain their salaries, driving up large banks, airlines, and consumer goods manufacturers. UnitedHealth Group and Goldman Sachs both jumped about 3.5%, leading the Dow, while United Airlines and Delta Air Lines rose approximately 5%. In contrast, Oracle fell about 4%, Palantir Technologies dropped about 3.5%, and Meta Platforms declined nearly 3%.

Market skepticism regarding the sustainability of capital expenditures related to artificial intelligence, along with profit-taking operations at year-end, have jointly suppressed the previously strong-performing technology sector. Although value stocks have performed strongly recently, analysts remain uncertain about whether this style shift can be sustained.

Jamie Cox, a managing partner at Harris Financial Group, stated, "It is a reasonable choice to responsibly reallocate profit capital." Sam Klar, portfolio manager of the GMO Domestic Resilience ETF, pointed out that after experiencing strong gains this year, investors are reassessing "how good the AI fundamentals really are," and this uncertainty creates natural volatility. Barclays downgraded value stocks from neutral to negative while reiterating a positive stance on growth stocks, believing that deteriorating consumer sentiment and potential monetary easing will continue to benefit the technology-led growth sector.

Looking ahead, year-end trading dynamics, whether the Federal Reserve will cut interest rates in December, and economic data for the first quarter of next year will all be key factors in determining market direction.

Healthcare and Industrial Stocks Take Over from Technology Stocks

Since early November, sectors that have lagged for most of the year have suddenly surged to the forefront. Healthcare stocks have "clearly become active," and industrial stocks have performed strongly, breaking the monopoly of AI trading. Cox from Harris Financial Group stated, “The theme is clear: value stocks are back.”

The Dow closed at 48,254.82 points on Wednesday, up 0.7% or 327 points. The S&P 500 index rose by less than 0.1%, while the Nasdaq fell by 0.3%. UnitedHealth Group and Goldman Sachs led the blue-chip stocks higher, both up about 3.5%, while Nike rose 1.7%. The transportation sector performed particularly well, reflecting market expectations for a recovery in economic activity following the end of the government shutdown Most large tech stocks failed to participate in this round of rebound. Previously, the Nasdaq experienced widespread selling starting at the end of October, triggered by several companies reporting AI-related spending plans that exceeded expectations. Marta Norton, Chief Investment Strategist at Empower Investments, stated, "We did not see a significant rebound after last week's sell-off, and the issue of overvaluation in AI still casts a shadow — which is reasonable."

A notable exception is chip manufacturer AMD, whose stock rose about 9% after the company informed analysts that it expects chip sales to grow at an annual rate of 80% over the next few years.

Year-End Profit-Taking or the Beginning of a Style Shift?

Market observers have differing opinions on the nature of the style switch; some believe it is merely a tactical adjustment at year-end, while others see signs of a deeper transformation.

Cox from Harris Financial believes: "Profit-taking is a responsible practice; it is a responsible reallocation of capital." He pointed out that locking in profits before year-end is normal for tech stocks that have significantly risen since the tariff shocks in April.

Justin Bergner, a portfolio manager at Gabelli Funds, expressed skepticism: "I am skeptical that there will be a major rotation away from tech stocks to sustain the bull market. However, on days when tech stocks perform somewhat unevenly, the bull market will find other contributing sectors."

Klar from GMO noted that growth stocks have led for the past few years, and now value stocks need to prove they can capture some momentum. "There have been many false moves along the way," he said, noting that a "big rotation" favoring small-cap and value stocks occurred in the summer of 2024 but ultimately proved to be short-lived.

Bob Savage, BNY's Head of Market Macro Strategy, warned against overinterpreting short-term style shifts. He believes that pension funds, foreign investors, and other types of investors have not seen enough reason to materially change their allocation to the tech sector. Instead, this style shift seems more like risk-oriented portfolio managers taking profits at the end of another strong year.

Savage stated: "This rotation is entirely about 'let me hold on until year-end so I don't get liquidated due to valuation issues.' But the first quarter of 2026 will be determined by what happens in December. Show me the data, show me the Fed cutting rates again, show me growth, and I'll tell you what I'm going to do in 2026."

Barclays Takes a Contrarian View on Value Stocks, Remains Bullish on Growth Stocks

In stark contrast to recent market performance, Barclays strategist Venu Krishna's team decisively downgraded value stocks from "neutral" to "negative" in a report released on November 11, while reaffirming a "positive" stance on growth factors.

Barclays noted in the report:

We have downgraded value stocks to negative due to declining consumer sentiment and a weakening labor market, which may lead to monetary easing, thereby reducing the attractiveness of value relative to growth. The sector bias of value stocks also poses risks, as earnings per share in sectors like discretionary consumer goods, energy, and consumer staples are being downgraded, while earnings expectations in the tech sector are rising Barclays believes that the deterioration of consumer sentiment, potential expectations for interest rate cuts, the continued narrowing of market breadth, and negative earnings revisions faced by value-oriented sectors collectively create an unfavorable environment for value stocks. In contrast, strong earnings driven by technology stocks and a loose financial environment continue to support growth stocks.

Federal Reserve policy is a key variable, and analysts are divided on whether the Fed will cut interest rates again in December. Analysts believe that there is still a divergence among senior officials at the Fed regarding the two major threats of inflation and a weak labor market. The central bank's decisions may have a decisive impact on market styles