Fed Pivot Hopes Send Chip Stocks Flying—Here's What Actually Changed

Wall Street shook off early jitters Friday with a modest but meaningful bounce: S&P 500 +0.98%, Dow +1.08%, Nasdaq 100 +0.77%. Nothing earth-shattering on the surface, but the real story was buried in the nuance.

The Catalyst: One Fed Comment Changes Everything

New York Fed President John Williams dropped a dovish grenade—saying the Fed sees room for rate cuts “in the near term.” That single phrase was enough to send Treasury yields cratering. The 10-year yield nosedived 2.4bp to 4.061%, hitting a 3-week low. Market odds for a December rate cut jumped from 35% to 63%. That’s a seismic shift in expectations.

Chip Stocks Led the Charge

Semiconductor stocks had been getting hammered for three weeks straight as investors worried about AI spending ROI and sky-high valuations. Friday, they clawed back: GlobalFoundries +5%, ON Semiconductor +4%, with Micron, Intel, and Qualcomm all posting +2% gains. Why? Lower rates = cheaper capital = better margins. Housing stocks followed the same logic, with builders up 4-7% on rate-cut enthusiasm.

But Here’s the Catch: The Fed Is Split

While Williams sounded dovish, Boston’s Susan Collins and Dallas’s Lorie Logan pumped the brakes hard. Collins said holding rates steady is “appropriate,” and Logan effectively ruled out December cuts unless inflation shows signs of accelerating collapse. Translation: the Fed’s messaging is muddled, and traders shouldn’t get too comfortable with rate-cut bets.

The Macro Backdrop

• Inflation easing: 1-year expectations fell to 4.5% (from 4.7%); 5-10 year dropped to 3.4% (from 3.6%)
• Manufacturing weak: US PMI at 51.9, barely above contraction; Eurozone PMI fell to 49.7, steepest contraction in 5 months
• Consumer sentiment improving: Revised upward to 51.0, beating expectations
• Q3 earnings crushing it: 82% of S&P 500 companies beat forecasts; earnings up 14.6% YoY vs. 7.2% expected—best quarter since 2021

Overseas Reality Check

Europe and Asia weren’t celebrating. Euro Stoxx 50 -0.98%, Shanghai Composite -2.45%, Nikkei -2.40%. Weak global growth data is starting to matter more than US rate-cut hopes.

The Wildcard: Delayed Economic Data

The BLS pulled October CPI and employment reports due to the government shutdown, then bunched them into November releases. Markets won’t see the full economic picture until mid-December. That means Friday’s rally is partially built on incomplete data—risk-on positioning in a fog.

Bottom Line

Friday felt like a relief rally more than a trend reversal. Chip and housing stocks found buyers on cheaper money, but the Fed’s mixed signals and weak global growth keep the rally on a short leash. If December data disappoints, or if the Fed’s dovish pivot fizzles, the three-week selloff could resume.