Market's Rebound Machine: Chip Sector Powers Broad Stock Recovery on Softer Inflation Data

U.S. equities found their footing today as semiconductor stocks emerged as the primary rebound machine, lifting major benchmarks higher across the board. The S&P 500 advanced +0.79%, while the Nasdaq 100 surged +1.43%, with December E-mini contracts mirroring these gains at +0.78% and +1.40% respectively. The Dow Jones climbed +0.59%, signaling broad market participation in today’s recovery.

The catalyst for this turnaround came from two critical economic signals. First, November’s consumer price data proved markedly weaker than anticipated, with core CPI rising just +2.6% year-over-year—the slowest pace in 4.5 years and well below the forecasted +3.0%. This favorable inflation backdrop was reinforced by softer jobless claims, which dropped 13,000 to 224,000, meeting expectations and suggesting labor market stability without overheating.

The Chip Sector’s Commanding Rally

Semiconductor stocks became the market’s rebound machine, with Micron Technology leading the charge at +14% following a stellar guidance update. The memory-chip manufacturer reported Q1 revenue of $13.64 billion, surpassing consensus by $690 million, and projected Q2 revenue of $18.3-$19.1 billion—a substantial beat versus the consensus of $14.38 billion. Management credited surging artificial intelligence demand and supply constraints that are allowing premium pricing.

The semiconductor strength radiated across the sector. Sandisk jumped +8%, while Western Digital, Seagate Technology Holdings, and Lam Research each advanced more than +7%. Applied Materials and KLA Corp gained over +4%, with Advanced Micro Devices, Marvell Technology, ASML Holding NV, and ON Semiconductor each posting gains exceeding +3%. This coordinated rebound demonstrates how technology sector momentum can function as the market’s rebound machine.

Fed Policy and Treasury Markets

Bond markets reflected the dovish implications of softer inflation data. March 10-year Treasury notes climbed to 1.5-week highs, pushing the 10-year yield down 3.7 basis points to 4.116%—also a 1.5-week low. The steepening yield curve, accelerated by the Fed’s recent announcement to purchase $40 billion monthly in short-term T-bills, continues to pressure longer-dated securities.

Market pricing now discounts only a 27% probability that the FOMC will cut rates by 25 basis points at its January 27-28 meeting. Meanwhile, the ECB held its deposit facility rate steady at 2.00%, while the Bank of England cut its official bank rate by 25 basis points to 3.75% in a 5-4 vote, suggesting divergent monetary policy paths across major economies.

Cryptocurrency-Linked Stocks Gain Momentum

Digital asset exposure stocks capitalized on Bitcoin’s +2% gain. Riot Platforms and Galaxy Digital Holdings each jumped more than +3%, while MicroStrategy and Coinbase Global advanced by over +2%. Marathon Digital added more than +1%, reflecting broad participation in crypto-related equities.

Noteworthy Individual Movers

Beyond the semiconductor rally, Trump Media & Technology Group surged +27% following news of a merger agreement with TAE Technologies in an all-stock transaction valued at $6+ billion. Lululemon Athletica climbed +6% after reports of Elliott Investment Management’s $1 billion stake accumulation. GE Vernova gained +5% on Jeffries’ buy upgrade with an $815 price target.

On the downside, Insmed plummeted -14% after announcing that a mid-stage trial for nasal inflammation therapy failed to meet efficacy goals, prompting program discontinuation. Birkenstock fell -3% after guiding 2026 adjusted Ebitda to €700 million, missing consensus by €57.8 million. FactSet declined -2% on revenue guidance below consensus expectations.

Economic Calendar and Outlook

This week remains focused on U.S. economic data. Friday will bring November existing home sales, expected at +1.2% month-over-month to 4.15 million, while the University of Michigan consumer sentiment index is anticipated to revise upward to 53.5 from 53.3.

Internationally, markets painted a mixed picture. Europe’s Euro Stoxx 50 rose +0.57%, China’s Shanghai Composite closed +0.16%, yet Japan’s Nikkei Stock 225 retreated to 3-week lows, closing down -1.03%. European government bond yields drifted higher, with the 10-year German bund yield climbing to an 8-month peak of 2.897%.