Nasdaq gains 1.05%, S&P 500 up 0.66%; mega-cap tech leads the charge
Easing expectations for an October rate hike bolster sentiment; semiconductor sector sees mixed results for Intel and Micron
Wall Street posted solid gains as investors pivoted toward mega-cap technology stocks. A cooling trend in employment growth has tempered expectations for a Federal Reserve interest rate hike in October, providing a tailwind that pushed the Nasdaq Composite to an all-time closing high.
As of market close on the 5th (local time), the Dow Jones Industrial Average rose 90.94 points (0.18%) to finish at 51,267.90. The S&P 500 climbed 51.23 points (0.66%) to close at 7,773.95, while the Nasdaq Composite surged 286.45 points (1.05%) to 27,477.31. The S&P 500 has now narrowed the gap to its previous record high to approximately 0.3%.
The market rally follows a shift in interest rate sentiment sparked by employment data released on the 2nd. With U.S. non-farm payrolls increasing by only 29,000 in September—falling short of market expectations—the urgency for a rate hike in October has diminished. According to CME FedWatch data cited by Reuters, the probability of an October rate hike dropped to approximately 24% on the 5th, down significantly from roughly 70% a week ago.
Mega-cap tech stocks were the primary beneficiaries of this shift. NVIDIA climbed 2.12% and Broadcom rose 2.08%, while Microsoft and Meta advanced 1.48% and 1.90%, respectively. Tesla jumped 2.20% and Alphabet gained 0.86%. In contrast, Apple and Amazon retreated slightly, falling 0.24% and 0.05%, reflecting some divergence within the tech sector.
However, the momentum seen in NVIDIA and Broadcom did not spread across the entire semiconductor landscape. Intel shares fell 2.63%, Qualcomm slid 2.21%, Micron shed 1.02%, and AMD edged down 0.34%. The Philadelphia Semiconductor Index closed up just 0.28% at 13,172.74, underperforming the Nasdaq. Conversely, storage firms Western Digital and Seagate saw gains of 6.34% and 4.49%, respectively.
Beyond tech, payment giants Visa and Mastercard rose 2.51% and 2.23%, respectively. Healthcare was mixed: while UnitedHealth and Abbott climbed 1.80% and 2.67%, Merck and Bristol Myers Squibb tumbled 3.30% and 3.83%, respectively.
Despite the rally, inflationary pressures persist. The Institute for Supply Management (ISM) reported that the U.S. services Purchasing Managers' Index (PMI) for September came in at 54.9, down from 55.4 the previous month, though it remained comfortably above the 50-point threshold indicating expansion. While the pace of growth in the service sector moderated, the prices paid index rose from 72.6 to 74.0, hitting its highest level since July 2022. This suggests that businesses are facing mounting upward pressure on costs.
Long-term interest rates also trended higher. The yield on the 10-year U.S. Treasury note rose to 5.31%, moving in contrast to the cooling expectations for an October rate hike. Nevertheless, the equity market managed to sustain its upward momentum, fueled by the strength of large-cap tech stocks despite these yield headwinds.
Market focus now shifts to the third-quarter earnings season, which kicks off next week with reports from major financial institutions such as JPMorgan. Investors will be closely watching whether corporate earnings and forward guidance can provide the fundamental support needed to sustain the current market rally.
