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Stocks snapped a three-day losing streak Tuesday, carried by a recovery in chip stocks and hopes for strong earnings from some of America’s biggest tech companies.
The Nasdaq composite saw the largest gains among major U.S. benchmarks, climbing 1.3%. The S&P 500 rose 0.9%. Yesterday’s loss leader, the Dow industrials, notched a gain of 0.7%, or 385 points.
Recent weakness among chip stocks has been fueled by fears that China’s newest artificial-intelligence players could disrupt the field. Others have been nervous that the fundamentals in the business, while promising, won’t live up to the valuations in the sector.
More sanguine investors have noted that new competition from overseas doesn’t eliminate the need for companies to continue to spend billions to support the AI build-out.
“It’s just kind of a hiccup along the way to what’s been a pretty long AI infrastructure spending cycle that’s likely to continue,” said Michael Arone, chief investment strategist at State Street Investment Management.
Some tech companies linked to AI infrastructure returned to the form Tuesday that has made them investor darlings for months. Sandisk, Micron and Seagate Technology jumped more than 10%, while Intel, Advanced Micro Devices and Applied Materials all moved higher by at least 7%. The PHLX Semiconductor index jumped 5.2%, its biggest one-day gain in a month.
Oil benchmarks continued their upward march. Brent crude surpassed $90 and saw its sixth gain in seven sessions. The price rose by $1.79 a barrel to $91.01, the highest closing value for Brent crude futures since June 10. The U.S. benchmark advanced 2% to $84.91.
Treasury yields are also ticking upward as inflation fears build, not because of a confident rotation into stocks, according to Mark Malek, chief investment officer at Siebert Financial. “The markets are behaving right but for the wrong reasons,” he said.
Malek said investors focused on buying the dip are missing the forest for the trees, looking past inflationary forces that should be driving valuations down.
Alphabet will be the first major hyperscaler this quarter to report its earnings. Its results are due tomorrow; IBM and Intel also report this week, as does Tesla. Investors are closely following Alphabet’s capital expenditure guidance, as a pullback would indicate cooling AI investment.
Write to Shradha Dinesh at [email protected]
