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A wild run in the U.S. small-cap stock market over the past week has left investors wondering whether this year's big tech winners will continue to gain strength.

Zhitong Finance APP learned that strategists at Bank of America Global Research said that continued stock market rotation depends on whether the 10-year U.S. Treasury yield is below 4% and whether the ISM manufacturing PMI index is above 50%.

A team of strategists at Bank of America International, led by equity and quantitative strategist Ohsung Kwon, pointed out in a report on Monday that historical data shows that when the 10-year U.S. Treasury yield falls more than 1 percentage point from its 12-month peak and the ISM manufacturing PMI index rises more than 4 percentage points from its 12-month low, the S&P 500 equal weight index outperforms the market capitalization-weighted S&P 500 in 90% of cases.

This suggests that for the stock market rotation to continue, investors need to see the current 10-year Treasury yield around 3.99%, below its 52-week closing high of 4.99% set on October 19, and the ISM Manufacturing PMI index above 50%, which means expansion in the manufacturing sector of the economy.

“The manufacturing economy is in the second-longest downturn on record, with 21 consecutive months without two consecutive months of PMIs above 50%,” Kwon and his team wrote. “We believe this is largely due to a destocking cycle, which we expect to ease in the second half of 2024.”

The Institute for Supply Management (ISM) manufacturing index fell to 48.5% in June from 48.7% in the previous month. Previously, the key indicator of US factories fell to 46.5% in July 2023, the lowest level in the past 12 months. A figure below 50% indicates that the industry is shrinking.

The 10-year Treasury yield rose 3 basis points to 4.268% on Monday as traders focused on Vice President Kamala Harris' possible selection as the Democratic presidential candidate. So far this year, the 10-year Treasury yield has risen 37.8 basis points as persistent inflation concerns have kept the Federal Reserve on the sidelines on rate cuts, according to FactSet data.

Still, traders in the federal funds futures market on Monday saw a 93.6% chance the Fed would begin cutting its benchmark interest rate in September, according to the CME FedWatch tool, but policymakers will still face a wave of inflation data before deciding on a rate cut in late summer.

U.S. stocks rose on Monday, with the "Big Seven" and chip stocks leading the gains after being beaten down last week.