Topline
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 … [+]
Key Facts
The S&P 500 gained 1.7% by midmorning, 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 0.4%).
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.
Surprising Fact
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.
What To Watch For
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.