Stocks rallied Wednesday morning ahead of a crucial meeting at the Federal Reserve, with battered semiconductor chip stocks leading the charge.
Chip, chip, hooray! The iShares Semiconductor exchange-traded fund (SOXX) rose more than 5%, its ... [+]
The S&P 500 gained 1.3% within 10 minutes after market open, which would be its largest percentage advance since February 22, and the tech-concentrated Nasdaq rose 2.1%, also storming toward its best day since February 22 (the less tech-leaning Dow Jones Industrial Average rose a modest 0.2%).
Driving the surge were chip stocks, as the iShares Semiconductor exchange-traded fund (SOXX) rose more than 5%, its steepest gain since May 2023.
Headlining gains were sector leaders Advanced Micro Devices and Nvidia’s 10% and 9% stock rallies.
Advanced Micro Devices delivered earnings above Wall Street expectations and Nvidia got a boost from top customer Microsoft’s indication it expects to spend even more on artificial intelligence technology to meet surging demand
Even after Wednesday’s runup, tech stocks are still down big in July, with the Nasdaq down 2%, the SOXX down 7%, Nvidia down 10%, and AMD down 8%, as investors cashed in on the last two years’ strong gains and rotated into previously neglected small-cap stocks.
The robust gains will be tested by the 2 p.m. release of the Federal Reserve’s interest rate-setting panel’s latest decision. That’s an event that typically brings significant immediate volatility in the equity market, especially among tech stocks, which historically perform better during lower-rate environments due to the high-growth companies’ need for new capital. Though the market prices in a roughly 97% probability the Fed will hold rates at its 23-year high of over 5%, investors are looking for any inkling that much lower rates are on the way. The Fed “is likely to revise its statement to hint that a cut at the following meeting in September has become more likely,” Goldman Sachs economist Jan Hatzius wrote in a note to clients previewing Wednesday’s meeting. Tech stocks will receive a further test after Wednesday’s market close when social media giant Meta reports quarterly results.