The Dow Jones cooled slightly from the highs of the day, but managed to end with gains of nearly 400 points. The S&P 500 gained 0.9%, while the Nasdaq Composite was up 1.2%. The chip stocks-heavy Nasdaq 100 index saw gains of over 550 points, or close to 2%.
Chip stocks ranging from Micron, Sandisk, Seagate, Western Digital to the ADRs of South Korea’s SK Hynix, gained between 11% to 15% overnight, while larger players like Nvidia, AMD and Intel saw shares gaining between 2% to 8%. The Philadelphia Semiconductor index, which recently entered a bear market on Friday, rebounded over 5%.
What Triggered The Rebound In Chip Stocks?
In a note late Monday, brokerage firm UBS said that this recent sharp sell-off in momentum stocks may be nearing its end, as most of the risky / leveraged positions have been unwound in the recent sell-off.
Hedge funds have cut their long positions in momentum and semiconductor stocks by over 5% of the total Gross Market Value, brining the net positioning in these Semiconductor names back to levels last seen in April, UBS wrote in its note.
The brokerage highlighted names such as Sandisk, Broadcom, Oracle Corp., KKR & Co., Datadog, Microsoft, among others in its list of momentum / semiconductor stocks.
Wall Street Rallies Despite Crude Surge
Indices on Wall Street gained despite a continued rise in crude oil prices overnight, with Brent closing above levels of $91 a barrel, levels last seen in early-June.
US President Donald Trump said that Iran desperately wants to meet but the US is not interested in meeting them until they are meaningfully ready.
Trump also reiterated his threat of attacking the Pickaxe Mountain soon, which according to US officials, is an Iranian nuclear site. He went on to add that if the Houthis cause or try to cause any disruption in the Red Sea, the US will respond to that.
West Texas Intermediate (WTI) or the US Crude variant is also trading with gains in early Asia trading on Wednesday, close to the mark of $85 per barrel.
Goldman Sachs has warned that a prolonged disruption here could take prices back to $120 a barrel by the fourth quarter of this year, although that is not what they are pricing in as their base case for now. That continues to show Brent Crude trading over $80 a barrel during the last three months of the year.
Two Major Triggers For Wall Street On Wednesday
The test for big tech will begin starting today with Google-parent Alphabet reporting its results for the quarter after market closing hours.
While the street will be awaiting the numbers, the focus will be on the outlook for the upcoming quarters, how has the cloud business fared, and more importantly, what about the billions in capex that the company announced in the previous quarter. Any changes to that will also be awaited.
Along with Alphabet, Elon Musk’s Tesla will also be reporting results during the course of the day. IBM, whose shares cratered the most in a single session in decades earlier this month after its preliminary numbers fell short of expectations, will also be coming out with its full quarterly results today.
