Written By: Trend Research
On Thursday, the Strait of Hormuz opened, and chip stocks hit a record high.
The provisional US-Iran agreement was officially signed in Geneva, with three Saudi supertankers transiting the Strait of Hormuz the same day. The geopolitical positive news outweighed the hawkish FOMC shock. The S&P 500 rose over 1%, the Nasdaq jumped nearly 2% to reverse a two-day losing streak, the Dow recorded its third record-high close this week, and the Philadelphia Semiconductor Index surged more than 6% to set another all-time high. Energy stocks bled collectively as oil prices fell, becoming the only losing sector for the day.
Market Performance
The S&P 500 closed up 1.08% at 7,500.58 points, the Nasdaq gained 1.91% to 26,517.93 points, the Dow edged up 0.14% to 51,564.70 points, and the Russell 2000 led the gains, rising 2.12% to 2,979.77 points. Gains decreased from small caps to large caps, with the Dow almost flatlining. This indicates that the primary drivers of the rebound were the high-beta names that fell the most in the previous two days, while defensive and blue-chip stocks failed to keep up. The US-Iran news had already been fully priced in pre-market, with indices maintaining a steady upward trajectory throughout the day, largely recouping yesterday's FOMC-induced losses by the close.
In the early hours, Trump confirmed on Truth Social that Apple and Intel have reached a design and foundry partnership, with Intel initially handling mature-node chips for iPads and older iPhones, while flagship products will continue to be supplied by TSMC. Negotiations have been ongoing for over a year. With this deal, Intel's foundry business secures its most significant external client, and Apple diversifies its reliance on TSMC. Neither company has officially responded, but the market priced in the directional significance.
In the same post, Trump also mentioned that Nvidia has agreed to have Intel produce its initial batch of chips and that Musk committed to jointly building the world's largest wafer fab, TerraFab. The Apple partnership is the third piece in Intel's foundry puzzle. Intel closed up roughly 10.5% at $133.82. Apple plans price hikes due to rising memory and storage chip costs, with SanDisk surging over 11% and Micron gaining nearly 9%, benefiting the entire storage supply chain. Nvidia rose nearly 3%, and the Philadelphia Semiconductor Index jumped over 6% to a record high. From equipment to storage to computing power, the entire AI value chain moved higher, confirming that the long-term logic of AI capital expenditure remains intact even after the hawkish dot plot landed.
SpaceX closed down 3.56% at $185.00, falling for a second consecutive day with a cumulative two-day decline of about 8.3%. Bloomberg reported that day that the company is preparing to issue at least $20 billion in investment-grade dollar-denominated bonds to repay a bridge loan maturing in 2027. Concerns over potential equity dilution, combined with the hawkish FOMC shock, constituted a double pressure behind the two-day decline. It is still up nearly 15% for the week and 37% above its IPO price from the first day of trading, but short-term pressure has not yet dissipated.
The energy sector led the declines among the S&P 500's 11 major sectors. WTI crude oil fell about 2% to $74.29 per barrel. ExxonMobil and Chevron both retreated, and the Dow Jones Transportation Average slid over 4%. The reopening of the Strait of Hormuz released all geopolitical premiums, and the year-to-date gains of 20-40% began to loosen. The energy sector went from being the biggest winner of the week to the biggest loser.
The technology, consumer discretionary, and industrial sectors led the gains in unison. Capital flowed from defensive and energy stocks into the computing power chain. Money that flowed out of tech stocks yesterday due to the FOMC shock partially flowed back today, taking advantage of the geopolitical positive news. The speed of this rotation indicates that these funds did not truly exit the market but were simply waiting for a reason to re-enter.
Macro Outlook
The VIX plunged 11.06% to close at 16.40. The panic sentiment triggered by yesterday's FOMC largely dissipated within a day, suggesting the market's pricing of the hawkish dot plot was more of a technical hedge than genuine risk aversion. The 10-year Treasury yield edged down to around 4.445%, while the 2-year yield remained above 4.18%. The market did not roll back its pricing for a September rate hike; volatility was merely suppressed temporarily by improved risk appetite. Gold fell to $4,210 per ounce, silver also declined, and the dollar index retreated slightly but remained elevated. Bitcoin (CoinGecko) traded around $64,026, and Ethereum hovered around $1,734. The crypto market showed no clear reaction to the geopolitical positive news, with the pressure from hawkish expectations not yet relieved. WTI crude oil closed at $74.29 per barrel, hitting a nearly three-month low.
Next week will see the release of PCE data, Flash PMI, and Micron's earnings report. Micron's guidance is the most direct barometer for AI computing demand; last quarter, a single below-expectation guidance triggered a sector-wide single-day plunge. The Russell Reconstitution will take effect at the close next Friday, with mechanical rebalancing flows expected to cause a significant spike in trading volume, elevating volatility for small-cap stocks.
Trend Perspective
Thursday's rebound stood on two legs: the US-Iran deal signing released the geopolitical premium, and chip stocks confirmed the AI narrative remains intact with actual gains. Both logics hold, but their durations differ. The geopolitical premium is a one-time event; once the deal is signed, it's largely priced out. If Iran backtracks later, the market reaction will be faster and fiercer than the first time. The chip stock logic is more durable. The simultaneous rise in Intel, SanDisk, and Micron indicates the day's rally had breadth across the supply chain, and the pricing of AI capital expenditure has fundamental support. Behind SpaceX's two-day decline lies a new variable: once the $20 billion bond issuance materializes, financing pressure and dilution expectations could become a sustained drag on the stock price, not just a valuation adjustment. Next week's PCE data is the nearest litmus test. If the data again comes in hotter than expected, solidifying a September rate hike from probability to consensus, Thursday's rebound will be merely a pause for breath. If the data softens, the market will repricing rate cut expectations faster than anyone expects.
