NEW YORK, July 19 (Reuters) - As earnings season goes

into full swing, bullish investors hope solid corporate results

will stem a tumble in technology shares that has cooled this

year's U.S. stock rally.

The S&P 500's technology sector has dropped nearly

6% in just over a week, shedding about $900 billion in market

value as growing expectations of interest rate cuts and a second

Donald Trump presidency draw money away from this year's winners

and into sectors that have languished in 2024.

The S&P 500 has fared somewhat better, losing 1.6% in

just over a week, with declines in tech partly offset by sharp

gains in areas such as financials, industrials and small caps.

The benchmark index is up more than 16% so far this year.

Second-quarter earnings could help tech reclaim the

spotlight. Tesla and Google-parent Alphabet

both report on Tuesday, kicking off results from the

"Magnificent Seven" megacap group of stocks that have propelled

markets since early 2023. Microsoft ( MSFT ) and Apple ( AAPL )

are set to report the following week.

Big tech stocks "have been leading the charge, and it's for

a good reason," said Scott Wren, senior global market strategist

at the Wells Fargo Investment Institute. "They're making money,

they're growing earnings, they're owning their niche."

Strong results from the market's leaders could assuage some

of the worries that have recently dogged megacaps, including

concerns over stretched valuations and an advance highlighted by

eye-watering gains in stocks such as Nvidia ( NVDA ), which is

up 145% this year despite a recent dip.

On the other hand, signs that profits are flagging or

artificial intelligence-related spending is less than

anticipated would test the narrative of tech dominance that has

boosted stocks this year. That could turn quickly into a problem

for broader markets: Alphabet, Tesla, Amazon.com ( AMZN ),

Microsoft ( MSFT ), Meta Platforms ( META ), Apple ( AAPL ) and Nvidia ( NVDA ) have

accounted for around 60% of the S&P 500's gain this year.

Corporate results for the market's leaders are expected to

meet a high bar. The tech sector is projected to increase

year-over-year earnings by 17%, and earnings for the

communication services sector -- which includes

Alphabet and Facebook parent Meta -- is seen rising about 22%.

Such gains would outpace the 11% estimated rise for the S&P 500

overall, according to LSEG IBES.

Anthony Saglimbene, chief market strategist at Ameriprise

Financial, believes many investors were caught off guard by an

inflation report earlier this month that all-but-cemented

expectations of a September rate cut by the Fed, sparking a

rotation into areas of the market that have struggled under

tighter monetary policy.

The move out of tech accelerated this week, after a failed

assassination attempt on Trump over the weekend appeared to

boost his standing in the presidential race.

In addition, semiconductor shares were hit hard after a

report earlier this week said the United States was mulling

tighter curbs on exports of advanced semiconductor technology to

China. The Philadelphia SE semiconductor index has

tumbled about 8% since last week.

"What we're advising investors to do is use some of the

pullbacks in these areas as an opportunity to allocate on a

longer-term basis," said Saglimbene, who believes the upcoming

earnings reports could ease the selling pressure on Big Tech.

To be sure, the widening of gains to other parts of the

market has heartened some investors over the durability over the

rally in stocks this year.

During the recent rotation, the number of stocks gaining

compared to those declining over five days reached its highest

rate since November, according to Ned Davis Research.

Historically, when gainers outnumber decliners by at least

2.5 times, as has been the case in this recent five-day period,

the S&P 500 has rallied an average of 4.5% over the next three

months, according to NDR.

"The risk is that mega-caps pull the popular averages lower,

but history suggests that strong breadth improvements have been

bullish for stocks moving forward," Ned Davis strategists said

in a report on Wednesday.