U.S. equities closed higher in a holiday-shortened trading week, with the Nasdaq Composite surging 2.43% and the S&P 500 advancing 0.93%, driven by a robust rebound in semiconductor stocks. The Dow Jones Industrial Average added 0.71%, while markets were closed on Friday for the Juneteenth holiday. The rally erased earlier losses triggered by midweek Federal Reserve jitters, as investors weighed the central bank's cautious stance on inflation and the potential for further interest rate hikes.
Intel Leads Chip Rally on Apple Collaboration
Intel Corporation (INTC) soared 10.6% on Thursday after President Donald Trump announced that Apple Inc. (AAPL) would partner with the chipmaker on U.S.-based chip design and manufacturing. The news ignited a broad semiconductor rally, with Nvidia (NVDA) adding 3% and Micron Technology (MU) gaining 8.7% ahead of its quarterly earnings report scheduled for Wednesday, June 24. The Philadelphia Semiconductor Index jumped sharply, underscoring the sector's dominance in driving market momentum.
Micron's shares have surged 298% year-to-date, according to Reuters, as investors bet on sustained demand from data centers and artificial intelligence spending. Analysts remain bullish on the AI revenue growth story. "There's still a lot of juice in that AI revenue-surprise narrative," said Andy Pratt, director of investment strategy at Burney Company. Steve Kolano, chief investment officer at Integrated Partners, described the market action as a "classic positive feedback loop."
Fed Holds Rates Steady; Inflation Concerns Linger
The Federal Reserve left the federal funds rate unchanged at 3.50% to 3.75%, maintaining its cautious posture. Fed officials reiterated that inflation remains a challenge, citing elevated energy costs. Market participants parsed Chair Kevin Warsh's less hawkish commentary and reassessed the probability of additional rate hikes this year. Eric Johnston, chief equity and macro strategist at Cantor Fitzgerald, noted that the market now affords the Fed "more credibility around inflation." However, the prospect of further tightening continues to pressure high-valuation growth stocks.
The technology sector (XLK) rose 2.7% for the week, while cyclical and defensive stocks lagged. The Russell 2000 small-cap index set another record high, reflecting broadening market participation despite underlying caution.
Mixed Earnings and Geopolitical Risks
Not all stocks participated in the rally. Accenture plc (ACN) plunged 18% after trimming the upper end of its annual revenue forecast, and Kroger Co. (KR) fell 8.4% following quarterly earnings that missed analyst estimates. The divergence highlights the risk of company-specific disappointments even in a rising market.
Oil prices declined after the U.S. and Iran reached a preliminary agreement aimed at reopening the Strait of Hormuz, a critical chokepoint for global oil trade. Adam Turnquist, chief technical strategist at LPL Financial, warned that "uncertainty remains elevated" due to potential flare-ups, shipping disruptions, and unresolved questions about Iran's nuclear ambitions.
Key Data Ahead: PCE Inflation and GDP
Investors now turn their attention to a busy week of economic releases. The Bureau of Economic Analysis will publish May personal income, outlays, and the Personal Consumption Expenditures (PCE) price index on Thursday, alongside the third estimate for first-quarter gross domestic product (GDP). The PCE index is the Fed's preferred inflation gauge, and any upside surprise could reinforce the case for rate hikes.
The current market consensus hinges on continued AI-driven earnings growth supporting semiconductor stocks, while inflation data keeps the Fed on hold. A hot PCE reading, a weak Micron forecast, or renewed geopolitical tensions in the Gulf could disrupt the rally. The S&P 500 trades near record highs, but the gains remain heavily dependent on AI chip stocks—any stumble in that sector could reverberate across the broader market.
