Dip buying drives U.S. stocks higher as chip stocks rally gains momentum
Chipmakers rose as bargain hunting fueled a rally on Wall Street. Investors are betting that the artificial intelligence trading that has fueled this bull market has further room to rise. At 9:30 New York time, the S&P 500 index rose 0.6%. The 100 Index rose 1.5% and the Dow Jones Industrial Average rose 0.4%. Leading chip stocks rebounded after a sell-off that sent related sectors into a bear market last week. A major industry index rose 4.5%. Gains in technology stocks overshadowed ongoing geopolitical risks, which continue to push up oil prices and fuel concerns that inflationary pressures could prompt the Federal Reserve to raise interest rates. Trading desks say a sharp sell-off in momentum stocks may be coming to an end, creating an opportunity for investors to re-establish positions in artificial intelligence and semiconductor stocks. Part of the reason the sector may be building a bottom is that a lot of speculative positioning has been unwound. UBS prime brokerage data shows that hedge funds have cut their long positions in momentum stocks and semiconductor stocks by about 5% of their total market value, one of the largest declines on record. However, companies are under increasing pressure to justify their AI spending. Investors will scrutinize corporate financial reports over the next two weeks for evidence that these investments are delivering higher returns, as questions continue to emerge about the hundreds of billions of dollars being spent on data center construction. and Alphabet will kick off earnings season for big tech companies on Wednesday.