JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Nasdaq Composite gets out of correction territory
- 10 of the 11 sectors in the S&P 500 Index finish to the upside
- The Cboe Volatility Index® falls below 20
It looks like the bulls are back in town. The market staged a striking turnaround immediately after the morning bell today, posting significant gains after last week’s drubbing and putting technology stocks back in the driver’s seat.
Artificial intelligence (AI) and semiconductor stocks moved higher, despite a steep drop in shares of Nvidia, the market leader in AI chips and infrastructure. Oil prices also slumped amid renewed hope that the war in Iran could come to an end. The president said U.S. attacks were “highly unlikely” amid ongoing talks, according to CNN. There were also published reports that oil reserves were rising as less fuel was being used in an effort to combat higher prices.
Filling up their car with gas is often when consumers first feel the pinch of higher costs. Gas prices fell to $4.01 per gallon on a national level, according to AAA. A month ago, they stood at $4.37 per gallon. Once lower crude oil prices show up at the pump, people may begin to feel they have more money to spend. WTI crude oil fell 4.07% to $87.13. WTI prices have dropped more than 16% in the last 10 days.
The Nasdaq Composite led the rally, ending the day up 2.7%, while the mega-cap tech- and semiconductor-heavy Nasdaq 100 Index closed up 3.4%. The Nasdaq Composite is no longer in a correction. The S&P 500 Index finished 2.3% higher, with 10 of the 11 sectors posting gains. The Dow Jones Industrial Average added more than 1,100 points to close 2.2% higher, recovering after three consecutive down sessions.
The tech sector was on fire. Advanced Micro Devices rose 13.3%, Marvell added 10.4%, Lam Research advanced 10.41%, Broadcom climbed 8.9%, Qualcomm gained 3.7%, Intel rose 5.5% and Meta advanced 5.1%. Alphabet added 2.1%, Microsoft rose 3.1% and Apple climbed 2.4%. Caterpillar added 7.21%.
It was a broad-based rally, as many investors bought shares after steep declines last week. We’ve talked about how retail investors have been buying on the dip for nearly 10 years, and once again, we’re seeing positive results from those who have. It’s like sports: When a play works, you go back to it again and again and again until it stops working.
Nvidia, however, didn’t get in on this rally. Shares fell 8% intraday and closed down 4.2% after the company initiated an independent investigation into Chief Executive Jensen Huang’s admitted extramarital affair with a woman whom U.S. intelligence officials believe to be a Chinese spy.
It’s worth noting the tech sector’s advance was still robust despite Nvidia’s share-price drop, given the significant weight Nvidia carries in all three major indices.
Moves like this don’t necessarily change the data center development narrative — AI stocks still have to show why these heavy investments are worth it. However, today’s advances, following the midterm elections and amid discussions of legislation that would require data center builders to cover the costs of electricity and water, may offer a legitimate path forward.
The Cboe Volatility Index® (the VIX® Index) dropped 22.3% to 19.92, falling below 20, a level often associated with relatively subdued volatility. On Thursday, the VIX® Index reached an intraday peak of 28.36. Moves like this often indicate a relief rally, but the question now is how sustainable it might be. Stay tuned.
Happy Trading!
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