(June 25): US stocks rallied at the open as traders trimmed interest rate hike bets after inflation data came in line with expectations, while a flurry of bullish forecasts from chipmakers reinforced confidence about demand outlook.
The S&P 500 opened 0.6% higher at 9.38am in New York, led by the industrials and technology sectors. The tech-heavy Nasdaq 100 rose 1.7% and is on pace to snap a three-session losing streak. The Dow Jones Industrial Average was up 0.7%.
Index gains are being juiced by a flurry of bullish reports from chipmakers. Micron Technology Inc soared after its quarterly sales forecast beat Wall Street expectations. Qualcomm Inc shares also climbed sharply after estimating more than US$15 billion of annual revenues by fiscal 2029 from artificial intelligence (AI) components. Elsewhere in the tech space, International Business Machines Corp shares jumped after the company unveiled the world’s first sub-1 nanometer chip technology.
After Micron’s “blow-out earnings, it might once again seem like ‘bulls on parade’ for semis,” said Jonathan Krinsky, chief market technician at BTIG LLC. He warned, however, that the sharp gains in chip stocks can quickly reverse, following in the recent trends of bitcoin, gold and software stocks.
He’s not alone in highlighting that risk. “The semiconductor complex now represents a concentrated macro risk if sentiment turns,” Barclays PLC analysts Ajay Rajadhyaksha and Amrut Nashikkar wrote in a note. Still, they noted that “order books are full well into 2027” and the likely time frame for the AI build out overshooting demand is in 2028, not 2026.
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The demand for chips is so acute that Apple Inc raised prices on its Macs, iPads and home devices on Thursday.
Better-than-feared economic data also helped push stocks higher, as traders trimmed bets the Federal Reserve would hike interest rates this year. US consumer spending accelerated in May. The core PCE prices rose 0.3%, in line with estimates but at a pace that avoided the worst-case scenario, Stephanie Roth, chief economist at Wolfe Research, said on a Bloomberg TV interview. “Even though it met consensus, there were many out there that feared it would be rounding up to 0.4%, which was a legitimate risk,” she said.
Initial jobless claims for the week ending June 20 were also lower than expected. Additionally, West Texas Intermediate oil prices slipped below US$70 a barrel as more ships pass through the key oil choke point of the Strait of Hormuz following the ceasefire between the US and Iran.
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“The worst of inflation and consumer angst may be mostly behind us,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “As long as gasoline prices trend lower, inflation expectations will likely follow suit.”
The results are reassuring after worries about high AI valuations sparked a three-day selloff in US equities. Chipmakers and other technology companies had come under pressure this week on concerns that the AI spending boom was losing momentum, with Micron’s results seen as a key test of demand.
“We’re overweight US equities and that’s partly because of the enthusiasm around AI and tech stocks overall,” said Michael Hunstad, president of Northern Trust Asset Management. “Not only do some of these tech names have great earnings expectations, they also have strong balance sheets. That’s enough to keep us in the pro-equities camp.”
Among single-stock movers, Bio-Techne Corp shares soared after Germany’s Merck KGaA agreed to buy the life-sciences firm for US$11.3 billion.
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