Nasdaq surges 2.5% as chip stocks rebound from selloff

The S&P 500 rose 1.8% to 7,394 and the Nasdaq Composite jumped 2.5% to 25,809 as chip stocks mounted their biggest recovery in over a year, snapping a two-day selloff that had erased nearly half a trillion dollars from the tech sector.

"The selloff was overdone relative to the fundamental demand story for AI infrastructure," said Hank Smith, director and head of investment strategy at Haverford Trust. "Chip stocks were due for a bounce after getting technically oversold, and the CPI data removed the worst-case scenario for Fed policy."

The Philadelphia Semiconductor Index surged 7.9%, its largest single-day gain since April 2025. SanDisk led the rally with a 14% jump, followed by Micron Technology, Applied Materials and ARM Holdings, each rising more than 11%. ASML and Intel added 9%, while AMD gained 7%. The rebound recouped a portion of Friday's 4% Nasdaq rout, which had been triggered by a stronger-than-expected jobs report that pushed rate-cut expectations further into 2027.

The rally brought the S&P 500 back within 1% of its record close on June 2, before the selloff began. The VIX, Wall Street's fear gauge, fell 6.4% to 20.79 after spiking above 22 during the selloff, signaling a return of calm.

Chips Lead the Recovery

The semiconductor rebound was broad-based, with every major chip stock closing in positive territory. Western Digital rose 8%, Seagate Technology gained 7% and Qualcomm added 6%. The move came after the sector had been pummeled late last week, with the Nasdaq falling 4% on Friday alone — its worst session in over a year — after the May jobs report showed 353,000 new positions, double the consensus estimate.

Treasury yields edged lower, with the 10-year yield slipping to 4.52%, providing additional support for growth stocks. The U.S. dollar index held near 100.1. Wednesday's CPI report showed inflation at 4.2% year-over-year, matching expectations and easing fears of an even hotter reading that could have forced the Federal Reserve to consider rate hikes.

Airlines Rally as Oil Retreats

The S&P 500 Supercomposite Airline Index climbed 8%, its best session since May, as oil prices retreated from conflict-driven highs. United Airlines and American Airlines each rose more than 9%, while Southwest Airlines added 7%. Brent crude fell 0.8% to $92.33 a barrel, and West Texas Intermediate slipped to $89.46, as U.S.-Iran talks continued despite fresh strikes over the weekend.

The rally extended across sectors, with the Dow Jones Industrial Average adding 1.9% to 50,847. The S&P 500's information technology sector led the advance, while energy was among the laggards as falling crude prices weighed on exploration and production companies. The broad-based nature of the rebound — with nine of 11 S&P 500 sectors closing higher — suggested investors were rotating back into risk assets after last week's flight to safety.

This article is for informational purposes only and does not constitute investment advice.