Tech Titans Roar Back, But Will Fed Play Along?
The tech superpowers flexed their muscle in a shocking intraday reversal today, raising the stakes for the Federal Reserve's pivotal meeting next week.
After being routed in the morning on hotter-than-expected inflation data, the tech-heavy Nasdaq Composite staged an epic comeback. The index erased a 2.5% deficit to close up 2.17% at 17,395, while the S&P 500 rallied 1.07%.
Sponsor
Buy This Top Tech Stock BEFORE Its Price Moves Higher
Claim Your FREE Report on the Top Tech Stock to Buy & Hold Now!
Leading the charge were the battered semiconductor stocks, with Nvidia skyrocketing 8% as CEO Jensen Huang talked up the firm's AI capabilities at a Goldman conference. Semis caught fire across the board, sending the SMH semiconductor ETF soaring over 5%.
The intraday swing also saw the megacap tech titans come roaring back, with Apple, Microsoft, Amazon and the Philadelphia Semiconductor index all surging over 2%.
The Fed Pivot Trade Rages On
The furious dip-buying was fueled by traders doubling down on bets that the Fed will raise rates by just 25 basis points next Wednesday.
While the "core" CPI component ticked up more than forecast, the overall inflation trajectory continues decelerating. Fed funds futures now imply a staggering 85% chance of a "baby hike," up from 65% before the CPI report. Investors are increasingly pricing in a hawkish pause after September as the lagging impacts of past tightening kick in.
That's giving new life to the "Fed pivot" narrative and hopes of a melt-up rally in risk assets, especially across the beaten-down tech space.
Melt-Up Potential in Tech?
Despite their gargantuan cash flows and solid dividend profiles, tech stocks have been body-slammed for over a year by the Fed's most aggressive tightening cycle since the 1980s. The Nasdaq remains nearly 15% below its record peak from late 2021 and trades at just 26 times forward earnings – well beneath its 10-year median around 30 times.
If the Fed signals it's ready to take a breather next week, these compressed valuations could quickly get repriced higher. A sustained rally could force the remaining stubborn tech shorts to cover while momentum traders and institutional money chase the trend higher.
Sponsor
Seven unknown AI stocks that could DOMINATE the next six years.
The original “Magnificent Seven” stocks generated 16,800% over the last 20 years.
But now a new set of AI stocks is set to take over. Full Story >>
Key Level: Nasdaq's 200-Day at 17,800
Today's manic buying offered a potential preview, with the Nasdaq reclaiming its 50-day moving average. The next pivotal level is the 200-day at 17,800 – a decisive breach could embolden momentum players to drive benchmarks to new highs before year-end.
Of course, all bets are off if the Fed pushes back hard against market pricing and signals more significant hikes are still needed to beat inflation. But if they validate expectations for a dovish pivot, portfolios with exposure to high-quality tech stocks and dividends may be prime beneficiaries of the next melt-up move.
It sets up a dramatic showdown between the central bank and rampaging tech bulls now forcing their hand. Today's violent reversal was the opening salvo – whether it morphs into a sustained sector breakout or another bull trap now rests squarely on the Fed's messaging.
YOU HAVE GOT TO CHECK OUT THIS NEXT PRESENTATION
Must-See: Elon's New Invention is Absolutely Insane
When you click here and see what Elon Musk’s new invention does…
And how it works…
You will NOT believe it.
You'll tell yourself this is just science fiction.
But Elon just tested this in a real human… And the result was mind-blowing. Click here to see it
