US stocks experienced a mixed session as a significant sell-off in high-profile chipmakers was largely outweighed by gains in the broader market, driven by declining oil prices and solid economic indicators. The S&P 500 managed a 0.4% rise, and its equal-weighted version, which removes market-value biases, hit record highs. The Dow Jones Industrial Average added 1.3%, extending prior gains. This resilience occurred despite the Nasdaq 100 being on the brink of a technical correction due to the semiconductor rout.
Economically sensitive industries saw increased momentum with strong earnings and a notable drop in Brent crude prices below $85, easing inflation concerns and pushing bond yields lower. Analysts from HSBC Holdings Plc, led by Max Kettner, attributed the strength in riskier assets to robust profit growth, undemanding valuations, a solid start to second-quarter earnings, a rebound in US economic forecasts, and other positive catalysts. The Conference Board's consumer confidence index also rose to 110.8.
The chipmaker decline represents a swift shift in sentiment for one of the market's most crowded trades, as concerns grow over whether the substantial investments in artificial intelligence will justify lofty valuations. This sets a challenging backdrop for upcoming earnings from megacap tech giants: Microsoft Corp. and Meta Platforms Inc. are scheduled to report on Wednesday, followed by Apple Inc. and Amazon.com Inc. on Thursday. The Federal Reserve's two-day policy meeting, starting Tuesday, concluded on Wednesday, with traders leaning towards the Fed holding rates steady, though a rate hike remained a possibility.
Despite the chip sell-off, some companies delivered strong results. Boeing jumped 4.8% after generating positive free cash flow, and Coca-Cola rallied 5% after raising its full-year outlook, bolstered by strong demand and its role as a FIFA World Cup sponsor. However, other earnings disappointed, such as United Parcel Service Inc.'s underwhelming outlook and Corning's 12% tumble after its third-quarter sales forecasts missed estimates. The PHLX semiconductor index, which had benefited from AI spending, fell 4.5% and is down about 25% from its June record high.
