Market Settles With Mixed Signals: Chip Stocks Surge While Big Tech Stumbles

Equity markets closed the week on Friday with a split personality. The S&P 500 finished +0.19% and the Dow Jones Industrial Average posted +0.66% gains, recovering from recent two-week lows. However, the Nasdaq 100 couldn’t keep pace, settling -0.17% as it touched a two-week low. In overnight trading, March E-mini S&P 500 futures edged up +0.17%, while March E-mini Nasdaq futures declined -0.19%.

Semiconductor Rally Carries the Day

The standout performers on Friday were semiconductor and AI infrastructure companies. Sandisk led the S&P 500 gainers with a surge exceeding +15%, while Micron Technology topped Nasdaq 100 winners with gains over +10%.

The semiconductor strength was broad-based. ASML Holding jumped more than +8% after receiving a double upgrade to buy from sell with a $1,500 price target. Lam Research, Intel, Marvell Technology, and Western Digital all climbed more than +4% to +8%. Applied Materials, AMD, KLA Corp, Seagate Technology Holdings, and ARM Holdings also participated in the rally, each gaining more than +4%.

Headwinds from Megacap Tech and Rising Yields

The rally’s momentum faced headwinds from an unexpected quarter: megacap technology stocks. The Magnificent Seven group turned lower despite an early pop. Tesla declined more than -2% after reporting Q4 deliveries of 418,227 units, trailing consensus expectations of 440,907. Microsoft fell more than -2%, while Amazon.com and Meta Platforms each fell more than -1%. Apple settled down -0.34%. Only Nvidia bucked the trend with gains exceeding +1%, and Alphabet eked out +0.69%.

Bond market action added pressure. The 10-year Treasury yield climbed to a 1.5-week high of 4.19% on Friday, rising +2.0 basis points to 4.187%. This reflected rising inflation expectations, as the 10-year breakeven inflation rate reached 2.264%, a 2.5-week peak. The yield’s ascent weighed on rate-sensitive growth stocks throughout the session.

Crypto Stocks and Other Movers

Cryptocurrency-exposed equities bounced higher as Bitcoin rose more than +1%. Riot Platforms surged over +11%, while Mara Holdings and Galaxy Digital Holdings each gained more than +10%. Coinbase Global advanced more than +4%, and Microstrategy finished up more than +3%.

Insurance stocks faced selling pressure, with Progressive dropping more than -6% and Erie Indemnity declining more than -3%. Allstate, AIG, and Travelers each fell more than -1%. Cybersecurity names also stumbled—Atlassian slumped more than -4% and CrowdStrike fell more than -3%, with Palo Alto Networks, Zscaler, and Fortinet each down more than -1%.

On the positive side, Sable Offshore rocketed over +30% after a federal appeals court cleared the way for the company to restart its California offshore pipeline. RH climbed more than +8% and Wayfair jumped more than +6% following President Trump’s decision to delay tariff increases on upholstered furniture into next year. Vertiv Holdings gained more than +8% after Barclays upgraded it to overweight with a $200 target.

Economic Data and Market Backdrop

The US December S&P manufacturing PMI settled at 51.8, exactly meeting expectations. European markets found strong footing on Friday, with the Euro Stoxx 50 rallying to an all-time high and gaining +1.02%. The Eurozone December PMI was revised down -0.4 to 48.4, though November M3 money supply surprised to the upside at +3.0% year-over-year—the highest reading in four months. The UK December PMI was revised to 50.6, down -0.6 from prior estimates.

European government bond yields moved higher alongside Treasury yields. The 10-year German bund climbed to a 1.5-week high of 2.910%, while the 10-year UK gilt reached 4.537%.

Market participants are pricing just a 15% probability of a -25 basis point rate cut at the Federal Reserve’s January 27-28 meeting, while swaps suggest only a 1% chance of a +25 basis point hike from the ECB at its February 5 policy decision.