Topline
Renewed optimism for battered semiconductor chip stocks, coupled with a friendlier Federal Reserve giving its biggest indication yet lower interest rates are on the horizon, sent stocks surging Wednesday.
Chip, chip, hooray! The iShares Semiconductor exchange-traded fund (SOXX) rose more than 5%, its … [+]
Key Facts
The S&P 500 rose 1.6%, its best day since Feb. 22 and second-best day of the year, and the tech-concentrated Nasdaq jumped 2.6%, also tallying its best day since Feb. 22 (the less tech-leaning Dow Jones Industrial Average rose a modest 0.3%).
Leading the surge were chip stocks, as the iShares Semiconductor exchange-traded fund (SOXX) rose more than 6%, its steepest gain since November 2023.
Headlining gains were sector leaders Nvidia and Broadcom’s 13% and 12% respective stock rallies.
Surprising Fact
Nvidia’s $329 billion in market capitalization added Wednesday is the single-largest value gained in a day ever, according to Bloomberg.
Key Background
Tech stocks historically perform better during lower-rate environments due to the high-growth companies’ need for new capital, and the Fed gave a strong indication Wednesday it’s on the cusp of lowering rates. Fed Chairman Jerome Powell told reporters the first rate cut is “on the table” at the Fed’s next meeting, in September, adding more broadly that lower rates are “approaching.” Remarkably, tech stocks have been resilient during the high-rate cycle which began two years ago, with the Nasdaq up 30% since the Fed first raised rates in March 2022. That’s largely due to the intense investor interest in generative artificial intelligence, with Nvidia’s more than 400% gain since the first rate hike leading the way.
Surprising Fact
Even after Wednesday’s runup, tech stocks are still down in July, with the Nasdaq down 0.4%, the SOXX down 5%, Nvidia down 5%, and AMD down 11%, as investors cashed in on the last two years’ strong gains and rotated into previously neglected small-cap stocks.
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