Wall Street rebounds on economic hopes: growth and tech stocks drive the market

Semiconductors Ride the Wave of AI Infrastructure Demand Despite Tariff Uncertainties

The tech giants stood out among the leaders, highlighting a market still eager for exposure to the artificial intelligence sector despite high valuations. Seagate Technology surged 10.14% following strong quarterly results, with revenue of $2.63 billion and a net profit of $549 million, alongside a dividend increase of 3%. The data storage solutions manufacturer also reassured investors by raising its second-quarter guidance to $2.7 billion. Micron Technology rose by 8.93% in an environment where demand for memory chips for data centers remains extremely robust. Lam Research and Applied Materials also recorded gains of 5.95% and 4.65%, respectively, benefiting from ongoing massive investments by hyperscalers in artificial intelligence infrastructure. These performances contrast with analysts' frequently expressed concerns about a potential speculative bubble. However, the issue of tariffs, debated Wednesday before the Supreme Court, weighed on investors' minds, with the likelihood of a decision favorable to the Trump administration dropping from 38% to 24%. Nevertheless, the semiconductor sector largely avoided tariff concerns thanks to promised exemptions for manufacturers with US operations.

Cyclical Stocks and the Aviation Sector Take Off Amid Economic Resilience

Beyond the technology sector, cyclical stocks delivered a positive surprise, indicating renewed confidence in the US economic trajectory. Southwest Airlines and United Airlines rose by 6.57% and 6.48% respectively, benefiting from sustained travel demand and optimism about year-end consumer spending. Johnson Controls, a major player in HVAC and building control solutions, advanced 8.84%, potentially gaining from expectations of increased domestic infrastructure investments. The private sector employment report added fuel to this rotation: 42,000 jobs were created in October, significantly exceeding the 30,000 expected following a decline of 29,000 in September. This data revitalized bets on a labor market more resilient than feared. The ISM services index also jumped to 52.4 in October from 50 in September, showing the fastest growth in eight months. However, the market also interpreted these robust figures as a signal reducing the likelihood of a Federal Reserve rate cut in December, with traders now setting this probability at 64%, down from 70% before the reports. Treasury yields rose, reflecting this reassessment of expectations.

Sector Setbacks: Health, Media, and High-Tech Servers Facing Challenges

The downside materialized with significant declines in several key sectors. Zimmer Biomet, an orthopedic giant, plunged 15.15%, falling victim to major analyst downgrades: JPMorgan downgraded the stock from Overweight to Neutral with a price target reduction from $115 to $100, while Goldman Sachs cut its target from $106 to $97, both deeming the quarter disappointing. Supermicro, an AI server manufacturer, dropped 11.33% despite raising its annual guidance, as the lack of earnings guidance heavily weighed on confidence. Live Nation Entertainment fell 10.59% after reporting disappointing quarterly results (earnings per share of $0.73 versus $1.32 expected, a shortfall of 44.7%). Axon Enterprise, a maker of tasers and related equipment, declined by 9.43% despite record revenue, as its profit margins were eroded by tariffs impacting its connected devices. Humana dropped 6.01%, hit by a downward revision of its 2025 guidance ($12.26 per share compared to $13.77 previously) due to rising cost inflation. These disappointments also reflect broader concerns about the threat of 250% pharmaceutical tariffs that the Trump administration announced would be gradually implemented.