Major stock indexes were sharply higher around midday Wednesday as chip stocks recovered from yesterday’s selloff, while investors await word from the Federal Reserve on interest rates and the release of more big-tech earnings after the closing bell.
The S&P 500 and Nasdaq Composite were up 1.7% and 2.5%, respectively, while the Dow Jones Industrial Average gained 0.6% The S&P 500 and Nasdaq both tumbled on Tuesday, led by steep declines in shares of Nvidia (NVDA) and other chipmakers.
Nvidia was up 12% Wednesday, while Advanced Micro Devices (AMD) gained 5% after reporting strong quarterly revenue and issuing upbeat guidance late Tuesday. The iShares Semiconductor ETF (SOXX) was up more than 5%, as Broadcom (AVGO), Micron (MU) and Qualcomm (QCOM) all jumped.
Microsoft (MSFT) shares were down 1.5% after reporting earnings that topped expectations but cloud growth that fell short of analysts’ estimates. The busy week of big-tech earnings will continue with a report from Meta (META) after the bell Wednesday and results from Apple (AAPL) and Amazon (AMZN) on Thursday. Meta was up about 2% on Wednesday.
Tech stocks have lifted the broader market most of the year, but in recent weeks they’ve stumbled as investors shift into small-cap stocks that are expected to benefit most from widely anticipated interest rate cuts. The Russell 2000 small-cap index, which has gained about 10% this month, was less than 1% Wednesday.
Investors could get clues on the timetable for rate cuts when the Fed wraps up its two-day policy meeting this afternoon. The central bank is expected to leave its benchmark lending rate unchanged this week, but market participants will be looking for the central bank to provide confirmation that economic data has given the Fed enough confidence to cut rates at subsequent meetings.
The yield on the 10-year Treasury, which is sensitive to expectations for rate cuts, was down to 4.10%, its lowest level since early March.
Crude oil futures, which have fallen in recent weeks, jumped more than 3% Wednesday amid concerns about the potential for further tension in the Middle East. Gold prices were up slightly.
Why Chip Stocks are Soaring Wednesday
1 hr 22 min ago
Nvidia (NVDA) and other chip stocks rebounded from Tuesday’s slump after better-than-expected earnings from Advanced Micro Devices (AMD) gave what could be a strong demand signal for the industry.
A report that expected U.S. restrictions on chip-equipment exports could be less stringent than previously thought also lifted some companies’ shares.
The iShares Semiconductor ETF (SOXX) was up nearly 5% in early trading Wednesday, recovering from Tuesday’s losses, though it’s still off highs seen earlier in the month.
The comeback for chip stocks comes after AMD reported strong second-quarter sales as data center revenue more than doubled year-over-year to a record high as demand for AI chips surged.
Microsoft (MSFT), a buyer of AMD’s AI chips, said in its earnings call after the bell Tuesday that it plans to ramp up investments in AI to meet demand, with nearly all of its $19 billion in capital expenditures allocated to cloud or AI investments.
Bloomberg / Contributor / Getty Images
Nvidia was among the stocks leading gains on the S&P 500 Wednesday after Morgan Stanley analysts reported “consistent upside to AI [capital expenditures].”
“The selloff presents a good entry point,” Morgan Stanley wrote.
An update on chip designer Arm’s (ARM) financial results after the bell Wednesday could reinforce the trend. Analysts expect Arm to report double-digit quarterly revenue growth after posting record-high royalty revenue a quarter earlier.
ASML Among Top Chip Stock Gainers
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Shares of Dutch semiconductor-gear maker ASML Holding (ASML) are soaring in early Wednesday trading on a report that the U.S. is on track to exclude chip-equipment makers in the Netherlands and elsewhere from its latest set of trade curbs aimed at reining in China’s tech advance.
According to Reuters, shipments from several countries that export key chipmaking equipment, also including, Japan, and South Korea, won’t be included in a Biden administration expansion of the Foreign Direct Product Rule next month.
The expansion will prevent around half a dozen Chinese fabs from getting exports from many countries, the report said. Places whose exports would be affected would include Taiwan, Israel, Singapore, and Malaysia. Taiwan is home to chip manufacturing giant Taiwan Semiconductor Manufacturing Company (TSM).
ASML shares had been struggling after Bloomberg reported earlier this month that that the Biden administration’s upcoming stricter curbs on China access to foreign chipmakers’ exports would be used to crack down on the Chinese businesses of ASML and Japan’s Tokyo Electron.
ASML shares were up 7% in early trading.
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AMD Surges on Strong Revenue
4 hr 21 min ago
Advance Micro Devices (AMD) shares moved sharply higher in premarket trading Wednesday after the chipmaker posted better-than-expected second quarter revenue and issued an upbeat sales outlook for the second half of the year.
Trading volumes have remained below average throughout the stock’s recent sell-off, while the relative strength index indicator nears oversold levels, setting the stock up for a post-earnings bounce.
AMD shares may encounter overhead resistance at key chart levels including $151, $170, and $187.
Read our full technical analysis here.
Futures Point to Higher Open for Major indexes
4 hr 51 min ago
Futures tied to the Dow Jones Industrial Average were up 0.2%.
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S&P 500 futures were up 1%.
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Nasdaq 100 futures were up 1.7%.
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