This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

Despite all the ups and downs due to the ever-changing trade war raging between the United States and China, the stock market is on track to reach record-high levels. Thanks to some new data that was released today from multiple sources we can say that overall sentiment around the economy and stock market is looking good, but where does that leave semiconductor companies like AMD and NVIDIA?

Consumer confidence increases and retail sales pick up

After a straight week of gains, the S&P 500 is close to breaking its all-time high of 3,025.86 that it set on July 26. Many of its heavyweights like Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and Microsoft (NASDAQ:MSFT) are having great years which are pushing indices like the S&P higher.

Stepping back, U.S. retail sales increased more than expected last month, which generally points to a stronger-than-expected economy. The Commerce Department released numbers today and it shows that consumer spending isn't letting up as many had feared. According to the government, spending rose 0.4% in August, buoyed in part by strong automobile sales as well as healthcare and hobbies. Retail sales increased by 4.1% versus August of 2018.

Adding to that narrative, the University of Michigan today reported that consumer sentiment in the U.S. rose to a 92 rating versus 89.8 in August. According to UofM researchings, most consumers that had a negative outlook mentioned the tariff back-and-forth with China. 38% of respondents mentioned tariffs.

Those who negatively mentioned tariffs also held more negative views on the overall outlook for the economy as well as anticipated higher inflation and unemployment in the year ahead.

However recently President Trump voiced his intent to reopen negotiations and China also said that it would consider relaxing tariffs on the most important American agricultural export to China, soybeans.

Finally, in terms of market outlook, the Fed has been slashing interest rates and is expected to cut rates once again, which makes the stock market more attractive versus other investment vehicles such as government bonds, which would see their yield (return) decreased with lower interest rates. However, this is mostly priced in at this point but should at least help to act as a bolster to investor confidence.

How will this affect specific stock marker sectors such as semiconductor companies?

It's great to have an overall improving market sentiment from investors and consumers, alike, but what about sector rotation? Sector rotation is a phenomenon where money shifts from one industry or larger sector to the next. Technology companies are seen as a riskier and more volatile sector as a whole and now numbers are starting to trickle that show a slight rotation into sectors such as energy, industrial, and finance.

Month-to-date all seems well with tech stocks still leading the charge, as has been the case for several years now

In fact, many economists agree that sector rotation is a strong sign of a bull market.

The stock market could do well as a whole, and yet we could still witness a tech sell-off, as we did last year. Technology stocks do typically see a sell-off during the fourth quarter but typically nothing as drastic as last year. As it appears right now, there has been a minimal rotation out of the technology sector, and PC and data center numbers look above average versus expectations for the year.

In fact, semiconductor companies such as Intel (NASDAQ:INTC), AMD (NASDAQ:AMD), Micron (NASDAQ:MU), NVIDIA (NASDAQ:NVDA), and TSMC (NASDAQ:TSM) have all outperformed the S&P 500 since August 1st. Not so fast though; if we take a look at the trailing 5-day sector chart, there is a definitely sell-off in tech and a resulting boom in energy and finance. Only time will tell if this is a microcosm or the start of a growing trend for the coming quarter.

Tech has been getting gashed compared to Energy and Finance in the last few days.

Some bearish sentiment might be growing. NVIDIA was hit with a bearish call by German bank DZ Bank today on August 13th. DZ Bank downgraded NVIDIA from Hold to Sell with a 14% discount on its price target to $158. His reasoning wasn't given, at least not made available to us, so it's hard to say why. NVIDIA has been tracking fairly well among most analysts given its strong and improving gaming performance and solid growth in both autonomous driving and data center/AI.

Almost every analyst cites the murky U.S.-China trade relationship since almost every major technology company is heavily exposed there. NVIDIA, for instance, announced a large supply agreement with Baidu that would see it supplying GPUs for AI and data center purposes over several years.

The strong retail performance I mentioned early in this article means lots of laptops, desktops, and computer peripherals getting sold; should the U.S. and China figure this mess out, or even if it appears close that they will do so, then the overall stock market and tech will be in for a solid Q4.