"The conditions for a rebound are ripe": Stocks rise for a second day ahead of big tech earnings reports

A rally in tech stocks ahead of earnings reports from industry giants boosted U.S. stock indices during trading on October 27, according to Bloomberg. The tech-heavy Nasdaq Composite index rose 1.2%, while the broad-market S&P 500 index gained 0.6%.

The Dow Jones Industrial Average, a "blue-chip" index, remained virtually unchanged.

Stocks of companies involved in artificial intelligence significantly outperformed the rest of the market. The PHLX Semiconductor Index rose 3.6%. Broadcom shares rose 4% after a consortium of banks, including Bank of America, Citi, and Morgan Stanley, along with the investment firm Blackstone, announced a $63 billion deal to acquire Broadcom’s technology on behalf of Anthropic, an AI startup preparing for an IPO. Other chipmakers also rose on this news: Micron shares gained nearly 3%, and AMD shares rose 5%.

Meta Platforms’ $25 billion stock offering sparked a rush of demand: investor orders exceeded the supply fivefold, according to Bloomberg. At the same time, the stock fell 1.6% over the course of the day. Oracle shares rose 3.6% on news of an expanded partnership with OpenAI.

There are several reasons behind the rally in tech stocks, now in its second day following last week’s sell-off. Yesterday, the release of Anthropic’s IPO prospectus reignited investors’ appetite for risk. “The news about Anthropic seems to have given a slight boost to the recovery in shares of companies operating in the AI sector, especially semiconductor manufacturers,” Chuck Carlson, CEO of Horizon Investment Services, told Reuters. “These stocks have fallen sharply in recent weeks, and the conditions for a rebound appear to be ripe.”

In addition, investors are bracing for earnings reports from tech giants whose combined market capitalization exceeds $10 trillion. Alphabet and Microsoft will release their reports on Wednesday, and Amazon will do so on Thursday.

Another positive factor was the nearly 2% drop in oil prices. Traders are also closely monitoring the Fed’s two-day meeting that began on Tuesday: the interest rate decision will be announced on Wednesday. The Fed is expected to leave the rate unchanged. However, traders will be looking for signals in the Fed leadership’s comments as to whether another rate hike will follow before the end of the year, according to CNBC.

Economic data generally indicate that the Fed has no compelling reasons to delay further tightening of monetary policy, according to Jerry Tempelman, vice president of macroeconomic research and fixed-income analysis at Mutual of America Capital Management. However, by signaling its intention to wait until December, the central bank has effectively “painted itself into a corner,” Bloomberg quotes the analyst as saying. Therefore, a rate hike on Wednesday would come as a surprise to the markets, Tempelman emphasizes.

“We believe a rate hike is likely at the end of this year and expect another hike in 2027, as the Fed seeks to combat inflation and curb a potential acceleration in economic growth,” James McCann, a senior economist at Edward Jones, told Bloomberg.

This article was AI-translated and verified by a human editor