Semiconductor Makers Spearhead Market Recovery as AI Infrastructure Bounces Back

Stock indexes climbed today as semiconductor manufacturers staged a notable comeback from recent selling pressure. The S&P 500 rose 0.25%, the Dow Jones Industrials advanced 0.57%, and the Nasdaq 100 gained 0.42%, with futures pointing to continued strength into tomorrow. This rally signals a shift in market sentiment as chip-related equities reclaim ground lost in recent sessions, bolstering the broader market in the process.

Semiconductor Makers Drive Broad Index Gains

Chip equipment and memory producers led today’s advance, demonstrating the continued centrality of semiconductor makers to overall market performance. Sandisk surged more than 7% following a buy recommendation from CTBC Securities, while Western Digital, Seagate Technology, and Advanced Micro Devices all gained over 3%. Intel and Lam Research added more than 2%, reflecting renewed investor interest in the semiconductor supply chain.

Beyond individual stocks, the rebound in semiconductor makers speaks to deeper market dynamics. These equities serve as barometers for both technology sector strength and global economic health, since chip makers are integral to everything from artificial intelligence infrastructure to consumer electronics manufacturing. Their recovery today suggests investors are viewing recent weakness as a buying opportunity rather than a structural concern.

Competing Headwinds: Energy and Cryptocurrency Retreat

While semiconductor makers attracted capital inflows, other sectors faced considerable pressure. Energy stocks retreated as West Texas Intermediate crude oil plunged more than 5%, driven by easing geopolitical tensions after President Trump indicated the U.S. is pursuing diplomatic talks with Iran. ConocoPhillips, Diamondback Energy, Occidental Petroleum, and Chevron each declined more than 2%, typical of the sector’s sensitivity to oil price movements.

Cryptocurrency-linked equities showed particular weakness, with Bitcoin diving to a 9.75-month low before stabilizing at approximately $67,160 with a 0.25% daily decline. This pullback reflected approximately $590 million in liquidated long positions over the weekend. MicroStrategy, Marathon Digital, and Galaxy Digital Holdings all retreated more than 3%, while Coinbase fell over 2%, underscoring the sector’s volatility.

Market-Moving Factors and Policy Developments

A third day of partial U.S. government shutdown weighed on sentiment, though relief may come as Congress returns from recess today to vote on a spending bill negotiated between President Trump and Democratic leadership. Separately, the Trump administration unveiled plans for a $12 billion strategic stockpile of critical minerals designed to reduce American dependence on China, prompting rare-earth stocks to surge. USA Rare Earth rallied over 9%, while United States Antimony and MP Materials gained more than 4% each.

On the international front, weakness in China’s economy signaled troubling implications for global growth. The Shanghai Composite fell 2.48% to a 4-week low after the January manufacturing PMI unexpectedly declined 0.8 points to 49.3, and the non-manufacturing PMI fell an equally steep 0.8 points to 49.4—the sharpest contraction in three years. These data points contradicted expectations and raised questions about Asia’s economic trajectory.

Economic Calendar: Key Datapoints Ahead

This week promises substantial market-moving economic data that investors and traders will scrutinize carefully. Today’s January ISM manufacturing index is expected to rise to 48.5, though this would still indicate contraction. Tuesday brings December JOLTS job openings data, with expectations for an increase to 7.25 million positions. Wednesday’s ADP employment change is forecast to rise 45,000, while the January ISM services index is expected to dip 0.3 to 53.5.

Looking further ahead, Thursday’s initial jobless claims are anticipated to climb 3,000 to 212,000, while Friday’s January nonfarm payroll report—widely viewed as the week’s most consequential data—is expected to show 65,000 job additions with the unemployment rate holding steady at 4.4%. Average hourly earnings are projected to accelerate 0.3% month-over-month and 3.6% year-over-year.

Earnings Season Gains Traction Amid Mixed Economic Signals

With 150 of the S&P 500’s constituents scheduled to report results this week, earnings season is accelerating at a critical moment. So far, 78% of the 167 companies that have reported have beaten expectations, suggesting that semiconductor makers and other equity holders may find support in bottom-line performance. According to Bloomberg Intelligence, S&P 500 earnings are expected to expand 8.4% in the fourth quarter, though growth outside the Magnificent Seven megcap technology stocks is more modest at 4.6%.

Companies including Palantir Technologies, which received an upgrade to outperform from William Blair, and Oracle, which announced plans to raise $45 billion to $50 billion through debt and equity issuance to build cloud infrastructure, continued to attract attention. Conversely, Walt Disney declined more than 6% after disappointing guidance for the second quarter, while IDEXX Laboratories and Humana faced selling pressure following earnings misses and analyst downgrades respectively.

Interest Rates and Fixed Income Market Dynamics

Treasury markets reflected the competing forces of hawkish Fed guidance and softening inflation expectations. March 10-year Treasury notes declined slightly on negative carryover from President Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair. Warsh, viewed as more inflation-hawk oriented than alternative candidates based on his 2006-2011 tenure as a Fed Governor, initially weighed on prices. However, the sharp decline in crude oil pricing—itself a disinflationary force—provided support for Treasuries, limiting losses. The 10-year yield edged up 1.2 basis points to 4.248%.

European fixed income markets showed mixed results. The German 10-year bund yield climbed 0.7 basis points to 2.850%, while the UK 10-year gilt yield retreated 2.4 basis points to 4.498%. The Eurozone January manufacturing PMI was revised upward by 0.1 point to 49.5, suggesting stabilization in European manufacturing conditions. Swaps are pricing in only a 1% probability of an ECB rate hike at the February 5 policy meeting, reinforcing expectations for a hold.

Market Outlook and Policy Implications

As semiconductor makers reclaim leadership and earnings season progresses, the market’s directional bias may hinge on economic data quality and policy developments. The convergence of government funding negotiations, Fed Chair speculation, and mixed global growth signals creates an environment of elevated uncertainty. Nonetheless, the resilience demonstrated by semiconductor makers today—coupled with continued strong earnings—suggests that market participants retain conviction in select growth areas despite macroeconomic challenges.