(June 19): US stocks rose on Thursday as chips shares extended Wednesday’s rally. Nvidia Corp topped S&P 500 Index gainers on a points basis, while the Philadelphia Semiconductor Index, known as the SOX, advanced more than 6% to a record high.
The S&P 500 Index climbed 1% as of 11.16am in New York, while the tech-heavy Nasdaq 100 added 2.2%. Chips companies Micron Technology Inc and Broadcom Inc were among the top S&P 500 gainers. Intel Corp also jumped after President Donald Trump said the chipmaker struck a deal with Apple Inc to design and produce semiconductors domestically. Apple edged higher after CEO Tim Cook told The Wall Street Journal the company plans to raise prices to offset higher memory and storage chips costs.
Volume was above average ahead of the Juneteenth holiday weekend and as the newly crowned NBA champion New York Knicks paraded down lower Manhattan. The largest-ever US options expiry in history was also slated for Thursday, with US$8.3 trillion of notional exposure set to roll off, according to data from Citadel Securities.
A combination of the Federal Reserve chairman’s first meeting, along with equity markets ETFs like the Invesco QQQ Trust Series and the VanEck Semiconductor ETF trading at all-time highs and the resolution of Middle East conflict “drove up appetite to lean on options to navigate risk-reward”, Citigroup strategist Vishal Vivek said. “Investors are increasingly using call options to position for upside.”
West Texas Intermediate crude oil slipped roughly 3% to about US$74 as Trump signed an interim deal to end the war with Iran and reopen the Strait of Hormuz. Yields on 10-year treasuries were around 4.42%, near a session low.
See also: Wall Street falls as traders see Fed hike by October
Traders increased interest-rate hike bets after Kevin Warsh used his debut press conference as Federal Reserve chairman to make clear the central bank won’t tolerate high inflation and signalled a revamp of the central bank’s communications strategy.
“A hawked-up Fed puts me in a more defensive mood,” Renaissance Macro Research head of economics Neil Dutta wrote late on Wednesday. “If Warsh’s attention is on a bunch of commissions, Fed communications, balance sheet, use and reliance on existing data sources, productivity and jobs, and Fed inflation frameworks, the balance of power shifts to the hawks.” JPMorgan strategists led by Jay Barry wrote “you’ll get nothing and like it.”
In earnings news, Accenture PLC tumbled 17% after the IT services company gave a fourth-quarter revenue forecast that fell short of Wall Street’s expectations. Supermarket chain Kroger Co shed 6.2% after adjusted earnings per share missed estimates and its CFO discussed consumer pressures.
See also: Nasdaq 100 falls 2% as chipmakers halt solid run
Meantime, a key source of support for big tech stocks is fading as spending on artificial intelligence (AI) is snuffing out steady share buybacks. Of the four biggest spenders — Alphabet Inc, Microsoft Corp, Meta Platforms Inc and Amazon.com Inc — only Microsoft bought back shares in the first quarter. Its US$3.4 billion in repurchases was the lowest total among the group in nearly a decade.
SpaceX shares fell 8.1%, continuing to slide after registerting their first post-IPO loss on Wednesday. Alphabet Inc dropped 0.17% as one of Google’s most prominent researchers is leaving for rival OpenAI. Noam Shazeer, who co-authored a seminal paper that helped catalyze the AI boom, announced his departure in an X post. Alphabet-unit Waymo is also recalling thousands of its robotaxis to fix a software issue that could cause the autonomous vehicles to enter and drive at speed through freeway construction zones.
Amazon.com Inc climbed 1.9% as it’s in talks to sell its custom-made AI chips for use in other companies’ data centres.
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