Chip-related stocks led the broader tech sector higher following a truce in the trade war with China, which dragged heavily on suppliers of semiconductors and related technology earlier this year.
The PHLX Semiconductor Index
SOX, +2.56%
rose as much as 5% in Monday’s trading session, and most recently was up 2.3%, about 7% off its all-time high. The index is up 29% for the year, following a 17% drop in May and a nearly 13% gain in June. In comparison, the tech-heavy Nasdaq Composite Index
COMP, +1.03%
was up 0.9% for the session and is up 21.7% for the year, and the S&P 500 index
SPX, +0.70%
was up 0.5% for the session and is up 18% for the year.
Chips were outperforming other areas of the tech sectors, as the iShares Expanded Tech-Software Sector ETF
IGV, +1.52%
rose 1.3%, the ETFMG Prime Cyber Security ETF
HACK, +0.26%
was up 0.1%, and the First Trust ISE Cloud Computing Index Fund
SKYY, +0.76%
was up 0.8%.
The bounceback in the chip sector follows what appears to be a truce at Group of 20 summit in Osaka in President Donald Trump’s trade war with China where additional tariffs Trump had threatened to put in effect will be put on pause while negotiations continue. While chip companies still have to be worried about the earlier tariffs and where these new talks will go, the small detente was welcomed Monday.
“The overall situation appears mostly status-quo; while Trump is holding off on new tariffs (for now), the existing tariffs remain in place, and it seems like trade negotiations are closer to the beginning than finalization,” said Bernstein analyst Stacy Rasgon of the chip sector in a research note. “Nevertheless, markets are likely to breath something of a sigh of relief, at least initially, on the view that things are (for now) at least not escalating.”
A truce is good news for companies like Micron Technology Inc.
MU, +4.29%
which derive about 13% of their revenue from companies like China’s Huawei Technologies Co. Micron saw shares rise 3.6% on Monday. Micron recently forecast a better-than-expected outlook in its last earnings call. But some analysts urged caution to being overly optimistic on how the current trade war thaw will play out in an industry racked with inventory problems.
Opinion: Micron investors may be too hopeful that the end of the downturn is near
U.S. traded shares of Taiwan Semiconductor Manufacturing Co.
2330, +3.97%
rallied 5.4%. TSMC is the world’s largest independent chip foundry that supplies manufacturing services to companies that don’t have their own chip-making facilities like Apple Inc.
AAPL, +1.98%
Nvidia Corp.
NVDA, +1.22%
Advanced Micro Devices Inc.
AMD, +2.49%
Xilinx Inc.
XLNX, +2.82%
and Qualcomm Inc.
QCOM, +1.83%
Shares of Qorvo Inc.
QRVO, +5.82%
and Skyworks Solutions Inc.
SWKS, +5.94%
were also rallying more than 5% on Monday.
Source : MTV
