Chip Sector Spearheads Market Rally as Tech Giants Drive Broad-Based Stock Gains

Equities surged today with the S&P 500 advancing +0.62%, the Dow Jones Industrials climbing +0.10%, and the Nasdaq 100 gaining +1.16%. March E-mini S&P futures posted +0.59% gains while March E-mini Nasdaq futures rose +1.14%, signaling continued momentum heading into the close.

The driving force behind today’s rally was unmistakable: semiconductor manufacturers and AI-infrastructure companies are leading the charge. This sector strength has become the primary engine propelling the broader market higher, with support also flowing from a strong showing in European equities. The Euro Stoxx 50 reached an all-time record high, rallying +0.99% and providing positive carryover effects for US investors.

Semiconductor Stocks Deliver Outsized Gains

Within the chip ecosystem, individual performers demonstrated exceptional strength. SanDisk (SNDK) topped S&P 500 gainers with a surge exceeding +8%, while ASML Holding (ASML) led Nasdaq 100 gainers with over +7% appreciation following a double upgrade from Alethia Capital to Buy with a $1,500 price target. Micron Technology (MU) advanced more than +7%, and Lam Research (LRCX) posted gains above +6%.

The momentum extended throughout the semiconductor supply chain. Applied Materials (AMAT), ARM Holdings (ARM), KLA Corp (KLAC), Advanced Micro Devices (AMD), and Intel (INTC) each gained more than +4%. Meanwhile, Western Digital (WDC), Marvell Technology (MRVL), Seagate Technology Holdings (STX), and Broadcom (AVGO) logged advances exceeding +3%.

Megacap Tech Stocks Contribute to Breadth

The Magnificent Seven stocks provided additional lift to today’s market performance. Nvidia (NVDA) and Alphabet (GOOGL) climbed more than +2%, while Amazon.com (AMZN) and Apple (AAPL) advanced over +1%. Tesla (TSLA) posted a more modest +0.31% gain.

However, not all mega-cap technology names participated equally in the rally. Microsoft (MSFT) declined -0.67% and Meta Platforms (META) retreated -0.57%, demonstrating that sector leadership today was concentrated rather than universal.

Interest Rate Pressures and Bond Market Dynamics

The fixed income environment presented headwinds for equity valuations. March 10-year Treasury notes (ZNH6) fell 2 ticks as the 10-year yield climbed +0.8 basis points to 4.163%. The rise accelerated to a 1.5-week peak of 4.191%, driven by reduced safe-haven demand following equity market strength and rising inflation expectations. The 10-year breakeven inflation rate surged to a 2.5-week high of 2.259%.

Internationally, European government bond yields moved higher across the board. Germany’s 10-year bund yield reached a 1.5-week high of 2.910% (+3.0 bp to 2.885%), while the UK’s 10-year gilt climbed to 4.530% (+3.2 bp to 4.511%).

Economic Data and Monetary Policy Signals

US manufacturing activity remained resilient. The December S&P manufacturing PMI stayed flat at 51.8, meeting consensus expectations. Futures markets are pricing just a 15% probability of a -25 basis point rate cut when the FOMC convenes January 27-28.

European economic signals presented a more cautious picture. The Eurozone December S&P manufacturing PMI was revised downward -0.4 points to 48.4, indicating contraction. However, the Eurozone November M3 money supply expanded +3.0% year-over-year, surpassing expectations of +2.7% and marking the strongest reading in four months. The UK December manufacturing PMI was similarly revised lower by -0.6 to 50.6.

Central bank monetary policy expectations remained subdued. Swap markets are pricing only a 1% probability of a +25 basis point rate hike by the ECB at its February 5 policy meeting.

Sector Rotations and Notable Individual Movers

Insurance stocks faced notable selling pressure. Progressive (PGR) led S&P 500 losers with a decline exceeding -7%. Erie Indemnity (ERIE) fell more than -2%, while Allstate (ALL), Hartford Insurance Group (HIG), Arthur J. Gallagher (AJG), and Travelers (TRV) each posted losses greater than -1%.

Conversely, select energy and consumer stocks gained traction. Sable Offshore (SOC) surged over +18% after a federal appeals court approved the company’s pipeline restart and oil pumping operations off California’s Santa Barbara coast. RH advanced more than +7% and Wayfair (W) climbed over +5% following President Trump’s decision to delay tariff increases on upholstered furniture until next year. Vertiv Holdings (VRT) ascended over +7% after Barclays upgraded the stock to Overweight from Equal Weight with a $200 price target.

The day’s trading reflected a market increasingly focused on growth-oriented sectors and companies benefiting from AI infrastructure expansion, while traditional sectors and defensive positioning faced relative headwinds amid rising interest rates and inflation concerns.