(Jan 16) : Asian technology stocks are set to gain after US equities recovered from their first back-to-back losses of the year, reviving confidence in the sector.
The S&P 500 and the tech-heavy Nasdaq 100 both rose 0.3% while a gauge of chipmakers climbed to a record after earnings from bellwether Taiwan Semiconductor Manufacturing Co. bolstered sentiment. Nvidia Corp. jumped more than 2% and ASML Holding NV advanced to an all-time high. Small caps kept rising, with the Russell 2000 beating the S&P 500 for a 10th day, the longest streak since 1990.
Asian equity-index futures were mixed, pointing to gains in Hong Kong and China, and losses in Japan.
Treasuries fell in US trading after jobless claims unexpectedly dropped to the lowest since November. Oil sank as President Donald Trump signaled he may hold off on attacking Iran for now. Silver slid after a blistering rally.
US stocks rebounded as the blowout outlook from TSMC renewed confidence in the durability of a key bull-market driver even as small caps climbed on signs of economic strength. The earnings also helped allay concerns over the sustainability of data-center spending amid a rotation out of richly priced technology shares.
“Technology stocks had looked vulnerable in recent weeks as investors rotated away from megacap names and into more cyclical areas of the market,” said Fawad Razaqzada at Forex.com. “TSMC’s update, though, appears to have stabilized that ‘rotation’ rather than reversed it outright.”
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A run of stronger-than-expected economic data has helped shape a growing sense that conditions are improving, with investors chasing riskier parts of the market that typically benefit in that scenario.
Traders will also be watching the rising tensions in the Middle East after Fox news reported that at least one US aircraft carrier is moving to the region. US military planners are preparing a range of options depending on the actions of the Iranian government in the next few days, Fox reported.
Separately, the US and Taiwan agreed to a long-sought trade pact that would lower tariffs on goods from the self-governed island to 15% and see Taiwanese semiconductor companies increase financing for American operations by US$500 billion.
See also: US, Taiwan clinch deal to cut tariffs, boost chip investment
Meanwhile, several Federal Reserve officials speaking Thursday signaled a willingness to pause rate cuts at their upcoming policy meeting, citing a labor market that appears to be stabilizing and ongoing inflation pressures.
Corporate earnings also remain in focus. This quarter will give investors confidence in the durability of earnings growth, which is a key driver for market returns over the next 12 months, said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
The money manager maintained its S&P 500 year-end target at 7,700. The gauge closed Thursday at 6,944.47.
While stocks are bouncing as the technology sector is getting a boost, there is growing evidence that not only are we seeing some “rotation” between different sectors in the marketplace, but we’re also seeing some of that rotation within the tech sector, according to Matt Maley at Miller Tabak.
“Investors seem to be a lot more confident that chip stocks can continue to grow their profits while they’re not so sure that the buyers of all of these chips — the hyperscalers — will see the same kind of profit growth,” he said.
uploaded by Isabelle Francis
