π Wall Street took a breath: Nasdaq +1.7%, chips soared and Intel added nearly 10%
Good morning investors! β After three red days, Wall Street finally had a solid green session. The Nasdaq gained 1.7%, the S&P 500 1.1%, and tech stocks were among the day's clear winners.
Help came mainly from two things that have been troubling the market lately β oil started getting cheaper and US bond yields retreated from their highs. On top of that, there was some interesting news directly from the semiconductor sector.
Let's get to the most important points. π
π Wall Street finally rises after three days
Yesterday's trading ended as follows:
π’ S&P 500: +1.1% π’ Nasdaq: +1.7% π’ Dow Jones: +0.6%
US stocks thus ended a streak of three losing sessions. Tech companies performed best.
The main change came in the bond market. The yield on the ten-year US Treasury fell back below the important 5% level and traded around 4.94%.
That's pleasant news for tech stocks. The higher bond yields are, the more competition they pose to equities, and the more pressure they put especially on the valuations of growth companies.
Yesterday that pressure eased at least a little.
At the same time, investors began to recover from the Fed's interest rate hike. The 0.25 percentage point increase itself was largely expected by the market. Now attention is shifting mainly to how many more times the Fed will be forced to raise rates.
π₯ Chips were back in play
An even more interesting situation unfolded in semiconductors.
After the previous sell-off, investors returned to chip companies in droves, and this sector significantly helped the entire Nasdaq.
π Intel $INTC +8% π AMD $AMD +6.5% π Micron $MU +5.5% π Marvell $MRVL +4.8% π’ Nvidia $NVDA +2.5%
Part of this move may be investors returning after the previous sell-off. Chip companies took a fairly hard hit in recent days, so the decline in bond yields created a better environment for buyers to come back.
But there was also some specific news.
π Stock of the day: Intel
Intel was among the biggest winners yesterday, with its shares gaining nearly 8%.
If you're not familiar with the company, Intel primarily makes processors for computers and servers, but it is also trying to build its own foundry business. That means it doesn't want to manufacture only its own chips, but also chips for other companies.
And that's where things get interesting.
Intel is in talks with South Korea's SK Hynix $SKHY about possible production of memory chips in the United States. One option is to use Intel's upcoming manufacturing complex in Ohio. The talks are still preliminary and no final agreement has been signed.
For Intel, potential cooperation would be important mainly because the company has invested huge amounts of money in new factories and needs to secure large customers for them.
SK Hynix is also one of the world's largest memory makers and a key player in HBM memory used in AI accelerators.
So if the talks actually turn into a major contract, it would be an interesting step forward for Intel's foundry strategy. For now, though, the word "if" really needs to be emphasized.
π€ Marvell rises thanks to AI data centers
Another interesting piece of news came from Marvell.
Marvell and GlobalFoundries expanded their collaboration and will increase production capacity of semiconductors used for high-speed optical connections in data centers.
Marvell rose as much as 6.3% during trading, and GlobalFoundries about 4%.
Why is this important?
An AI data center is not just a huge pile of Nvidia GPUs.
The individual accelerators must communicate extremely fast with each other and move enormous amounts of data. The larger the AI clusters, the more important the infrastructure that connects all these chips becomes.
And it's exactly this part of AI infrastructure where companies like Marvell make money.
The current AI boom thus creates opportunities not only for makers of the accelerators themselves, but also for companies around them β from memory to networking to optical data center interconnects.
π’οΈ Oil finally eased a bit
Another piece of good news for the market was a further drop in oil prices.
Brent fell about 1% to $104.82 per barrel.
Saudi Arabia began offering additional oil supplies via Oman, which eased some concerns about supply disruptions caused by the conflict in the Middle East.
This matters for stocks mainly because of inflation.
More expensive oil means more expensive transportation, energy and manufacturing. If oil starts to fall, some of these inflationary pressures may gradually ease.
But no big celebrations are in order yet.
Brent is still above $100 per barrel and the geopolitical situation in the Middle East remains very tense. For the Fed, energy prices remain one of the things it will have to watch very closely in the coming months.
π¦ The Fed still hangs over the market
The Fed raised rates by 0.25 percentage point to 3.75β4.00%. It was the first interest rate increase in over three years.
But what came next was even more important.
16 of the 18 Fed officials expect at least one more rate hike by the end of this year.
However, the market calmed down a bit yesterday, and investors will now focus mainly on further data on inflation, the labor market and energy prices.
Those will decide whether the Fed will really be forced to continue raising rates.
π What will I watch next?
In my view, the three most interesting things right now are bonds, oil and semiconductors.
If the ten-year yield stays below 5% and oil continues to fall, tech companies will get at least some room to catch their breath.
And semiconductors will be interesting in their own right. In recent days we saw a sharp sell-off and now a very strong return of buyers.
The AI story has certainly not disappeared. Rather, it shows once again how sensitive today's tech valuations are to rates, bond yields and any change in expectations around future AI investments.
So there's definitely no boredom in the markets. π
β‘ Yesterday in one minute
π S&P 500 +1.1% | Nasdaq +1.7% | Dow +0.6%
π Ten-year US Treasury yield fell below 5%
π’οΈ Brent fell to $104.82 per barrel
π₯ Semiconductors were among the day's biggest winners
π Intel +8% | AMD +6.5% | Micron +5.5%
π’ Marvell +4.8% | Nvidia +2.5%
π€ Intel continues to benefit from news of possible cooperation with SK Hynix
π€ Marvell expands AI data center capacity with GlobalFoundries
π¦ The Fed still signals that this year's rate hikes may not be the last
And that's all for today! βπ
Yesterday the market needed a bit of cheaper oil, lower bond yields, and investors immediately started returning to tech. Now it will be interesting to see whether it was just a one-day buy-the-dip or the beginning of a more significant comeback.