A rally in technology giants spurred a rebound in stocks as a blowout outlook from an artificial-intelligence bellwether rekindled hopes about the longevity of a key bull-market driver.
Buyers waded back into high-profile chipmakers after Taiwan Semiconductor Manufacturing Co., Asia's most valuable company, helped assuage concerns about the sustainability of current data-center spending. Nvidia Corp. led gains in megacaps and ASML Holding NV hit a record in Europe. Even with the tech bounce, small caps continued to outperform the S&P 500 amid signs of economic strength.
"A strong set of results from TSMC quickly shifted the mood, reminding markets that enthusiasm around artificial intelligence and long-term growth themes remains very much alive," said Fawad Razaqzada Forex.com.
Razaqzada noted that tech stocks had looked "vulnerable" in recent weeks as investors rotated into more cyclical areas of the market. Still, TSMC's update, appears to have stabilized that rotation rather than reversed it outright.
"The broader takeaway here is that while leadership within the index may continue to shift, there is still plenty of appetite for growth exposure," he said. "That balance between tech optimism and broader participation is likely to remain a defining feature in the weeks ahead."
Bonds fell after data showing a resilient labor market, with jobless claims unexpectedly sliding to the lowest since November. New York state factory activity expanded, while a gauge of prices received dropped to an almost one-year low.
Federal Reserve Bank of Chicago President Austan Goolsbee said the central bank's main priority should be to tame inflation, as the labor market shows signs of stabilizing.
The S&P 500 added 0.6%. The Nasdaq 100 climbed 1.1%. The Russell 2000 index of small firms rose 1.3%. The yield on 10-year Treasuries advanced three basis points to 4.16%. A dollar gauge was little changed.
Oil sank after US President Donald Trump signaled he may hold off on attacking Iran for now. Silver pulled back from a record high as investors took profits after a blistering rally and as the US refrained from imposing import tariffs on critical minerals.
Thursday's action suggests a bit of "bargain hunting" - especially in the tech space after the TSMC news as well as the pullback seen over the past couple of weeks, according to Kenny Polcari at SlateStone Wealth.
"If earnings continue to beat expectations and economic data remains supportive, the likely path remains advance, backfill, then advance again," he noted.
While stocks are bouncing as the entire technology sector is getting a boost, there is growing evidence that the not only are we seeing some "rotation" between different sectors in the marketplace, but we're also seeing some of that rotation within the tech sector, said Matt Maley at Miller Tabak.
"In other words, investors seem to be a lot more confident that chip stocks can continue to grow their profits while they're not so sure that the buyers of all of these chips (the hyperscalers) will see the same kind of profit growth," Maley said.
As the hyperscalers keep buying chips, it obviously helps the profits of those companies, he noted. However, if the cost of buying those chips does not subside, the hyperscalers are going to have a tough time increasing their profits especially since the prices they are charging for the end products are not moving up.
A strong macro environment in 2026, supported by easier monetary conditions and robust fiscal stimulus across major economies, is likely to favor cross-regional performance, according to Magdalena Ocampo at Principal Asset Management.
"AI, which has fueled US large-cap tech gains, faces greater scrutiny as investors shift focus from aggressive AI-related spending to profitability," she said. "While US tech allocation remains important, it may be prudent for investors to diversify into regions offering direct or indirect AI exposure at more attractive valuations and benefiting from supportive policy tailwinds."
Ocampo also notes that AI reinforces the importance of maintaining US exposure given its tech leadership. Still, concerns over aggressive AI-driven spending and high valuations heighten pressure for companies to deliver on earnings.
"Given US equity market concentration, investors should seek diversification," she said.
| The sense of calm that has pervaded the US stock market for months is masking unprecedented bursts of volatility in individual shares, say Barclays Plc strategists. Last year was a case in point, when some of the biggest components in the S&P 500 saw abnormal swings as the gauge registered an AI-led, 16% rally. Between the 100 largest index members, there were 47 instances of sharp selloffs - specifically, a drop of five standard deviations or more, a move so rare it's often considered an anomaly, according to Barclays. More of the same is probably ahead this year, Barclays says, in a call that underscores in part how dependent the benchmark gauge has become on the trajectory of shares related to the AI theme. But according to Barclays, it also shows how AI itself has sped up how traders process market-moving events. Corporate Highlights:
Key Events This Week Some of the main moves in markets: Stocks
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