Wall Street closed higher on Thursday, driven by a surge in chip stocks following President Donald Trump's announcement that Apple will collaborate with Intel on U.S.-based chip design and manufacturing. The Nasdaq Composite rose 1.04%, while the S&P 500 gained 0.79% and the Dow Jones Industrial Average added 0.28%. The rally was supported by a sharp drop in oil prices after the U.S. and Iran reached an interim agreement to reopen the Strait of Hormuz, easing some inflation concerns despite a more hawkish-than-expected tone from the Federal Reserve.
Intel Leads Chip Rally
Intel shares surged nearly 8% after Trump revealed the Apple partnership, which is expected to bolster domestic chip production. The news lifted the broader semiconductor sector, with Nvidia, Micron, and Marvell also posting strong gains. The Philadelphia Semiconductor Index outperformed other sectors, reflecting optimism about U.S. chip manufacturing capabilities. The move came as a welcome relief for tech investors who had been rattled by the Fed's cautious stance on rate cuts.
Fed Holds Rates, Signals Caution
The Federal Reserve kept its key interest rate steady at 3.5% to 3.75% during its June meeting, as widely expected. However, policymakers indicated that a rate hike could be on the table if inflation remains stubbornly above the 2% target. Fed Chair Kevin Warsh described the economy as growing solidly but noted that energy costs continue to contribute to price pressures. The hawkish tilt caused a brief dip in stocks on Wednesday, but Thursday's rally showed that investors are focusing on positive catalysts like the chip deal and lower oil prices.
Oil Prices Slide on Iran Deal
Brent crude fell 2.55% to near $78 per barrel after the U.S. and Iran signed an interim agreement to maintain the ceasefire and reopen the Strait of Hormuz, a critical shipping lane for global oil supplies. The deal provided some confidence to markets, according to Jim Baird, chief investment officer at Plante Moran Financial Advisors. However, analysts at Goldman Sachs expect Gulf oil exports to return to pre-conflict levels only by the end of July, with production stabilizing by October. BNP Paribas noted that even a swift restart would require significant time, leaving the outlook for energy markets uncertain.
Accenture Cuts Guidance, Drags on Consulting Stocks
Accenture shares fell after the consulting firm lowered its full-year revenue growth forecast to 3% to 4%, down from its previous range of 3% to 5%. CEO Julie Sweet attributed the revision to the indirect effects of the Iran war, which slowed the company's Middle East performance. She noted that it remains unclear how quickly conditions will improve. The news weighed on other consulting firms, with Cognizant, IBM, and Capgemini also declining.
Labor Market Shows Mixed Signals
Initial jobless claims fell to 226,000 for the week ended June 13, down 4,000 from the prior week's revised figure, indicating a resilient labor market. However, continued claims edged higher to 1.81 million, suggesting that some workers are facing longer unemployment spells. The data provided little relief for Fed officials, who are closely watching employment trends for signs of economic stress.
Market Outlook and Trading Activity
With U.S. equity markets closed on Friday for Juneteenth, traders had a shortened week to digest the Fed's message, oil price movements, and corporate news. Michael James, managing director at Rosenblatt Securities, noted that the Fed's hawkish tilt was clear, and that weaker oil prices alone would not end the inflation debate. Short-term rate futures now price in a higher probability of a September rate hike, according to Reuters.
Despite the rally, market participants remain cautious. While improved inflation data and the chip sector boost provided a tailwind, the broader move does not signal a widespread easing of rate worries. The path forward remains narrow, as Goldman Sachs Asset Management's Kay Haigh noted, suggesting that the Fed may avoid hikes but the margin for error is slim.
