S&P500: US Stocks Climb to Records as Chip Rally Powers Stock Market

S&P 500 Hits Another Record as Chips Surge 4%

The S&P 500 Index (SPX) is up 0.2% at midday Tuesday and trading at a new record high of 7620.90. The Dow is up about 127 points or 0.3%. The Nasdaq Composite is up 0.2%.

The Philadelphia Semiconductor Index is up roughly 4% and doing most of the work. Nvidia is strong at the mid-session. Marvell Technology jumped after Jensen Huang said the company could become a trillion-dollar business. The AI trade keeps finding new reasons to run.

Huang’s Marvell Comment Moved the Sector

Jensen Huang said Marvell Technology could become a trillion-dollar company. The stock is up more than 26% on that one comment. That is not a product announcement or an earnings beat. That is the CEO of the most important company in AI pointing at another chipmaker and telling the Street to pay attention. The Philadelphia Semiconductor Index jumped 4% and the rest of the sector followed.

Nvidia is up about 1% and continuing to lead the AI trade. Microchip Technology gained on an upbeat data center revenue forecast. Super Micro Computer is up roughly 6%. The semiconductor space is where the money is going today and the breadth inside the sector is wide.

HPE Posts Record Day

Hewlett Packard Enterprise is up about 25% and on track for the largest single-day percentage gain in the company’s history. Quarterly results beat estimates. Full-year guidance went higher. Moving the timeline forward tells the Street that the revenue from AI infrastructure spending is arriving faster than the company originally projected.

Alphabet is going the other direction. The $80 billion equity offering to fund AI expansion is still weighing on the stock. The market is not arguing with the AI investment. The market is arguing with paying for it through dilution when the company generates that kind of cash flow.

Software Gives Back Recent Gains

Seven of eleven S&P 500 sectors are higher. Utilities are among the strongest. Software ran hard the past few sessions and is giving some of it back. Microsoft is lower. Salesforce, ServiceNow, and Intuit are all pulling back with it. The money is not leaving AI. It is moving from the software side to the hardware side. Chips are building the infrastructure. Software is renting space on top of it. The market is paying up for the builders today and letting the renters cool off.

Advancing stocks outnumber decliners on the New York Stock Exchange. The breadth is healthy even with software dragging.

JOLTS Report Shows Labor Market Holding

The Bureau of Labor Statistics reported 7.6 million job openings in April. That is the highest level in nearly two years and came in well above expectations. Businesses are still looking to hire. Hiring activity itself slowed though, which means employers want workers but they are being selective about what they pay for them.

The Federal Reserve is watching this number closely. 7.6 million job openings means employers are still competing for workers. That keeps wages elevated. Beth Hammack made it clear today where the Fed stands. She said rate hikes are still on the table if inflation does not cooperate. She pointed directly at energy costs as the risk. That is a Fed official telling you the next move could be up, not down. The rate cut trade is dead until the data changes.

Daily S&P 500 Index (SPX) Technical Analysis

The main trend was reaffirmed on Tuesday with the new higher-high at 7620.90. Traders should now be focusing on yesterday’s close at 7599.95. For the third day, the price action looks a little tentative, which increases the odds of a closing price reversal top.

The closing price reversal top won’t change the main trend to down, but it will indicate that the selling is greater than the buying at current price levels.

The first downside target is the minor bottom at 7562.61. Taking out this level will shift momentum to the downside, which will be another sign that the buying is getting lighter and the profit-taking a little stronger.

The main range is 7333.68 to 7620.90. Its retracement zone at 7477.29 to 7443.40 is the first major support zone. Since the main trend is up then we’re still in buy the dip mode. Look for buyers on the first test of this area.

What to Watch

The AI trade keeps broadening. Huang’s Marvell comment added another name to the list and the semiconductor index gained 4% on the day. HPE’s record move showed the Street that AI infrastructure revenue is accelerating. The demand side of the story is not in question.

The risk side is the Federal Reserve. Hammack’s comments about potential rate hikes and the JOLTS data showing 7.6 million job openings are both pointing toward higher-for-longer at a minimum. The S&P 500 is at 7620.90 with three days of tentative price action at the highs. A close below 7599.95 today forms a reversal top. That does not change the trend but it signals that profit-taking has started.

More Information in our Economic Calendar.