Nasdaq Composite Jumps 0.9% as Semiconductors Stage a Comeback

The stock market struggled on Tuesday and Wednesday this week, but Wall Street is making a comeback today. Traders seem ready to trust that diplomacy could actually resolve the Iranian conflict and its implications on global oil prices.

Speaking to reporters aboard Air Force One, President Trump suggested that Iran called to make a deal. Investors responded by buying stocks and selling oil. Whether that optimism survives the next news cycle is anyone's guess. Either way, the major indexes are up today.

The Nasdaq Composite (NASDAQINDEX: ^IXIC) rose 0.9% by 12:19 p.m. ET, while the S&P 500 (SNPINDEX: ^GSPC) gained 0.6%. The Dow Jones Industrial Average (DJINDICES: ^DJI) added 0.3%, lagging its peers as industrial giant Honeywell International (NASDAQ: HON) continued its post-spinoff collapse.

^IXIC data by YCharts

Micron's $3 billion bet lifts the chip sector

Memory chip maker Micron Technology (NASDAQ: MU) jumped 7.5% after announcing a $3 billion investment in the U.S. semiconductor supply chain. The company is already pouring cash and concrete into chipmaking facilities in Texas and New York, with plans to invest "more than $250 billion" over the next decade.

The resulting chip rally was broad and enthusiastic. Advanced Micro Devices (NASDAQ: AMD) surged 7.2%, Broadcom (NASDAQ: AVGO) gained 3.3%, and the iShares Semiconductor ETF (NASDAQ: SOXX) rose 5.2%.

The rally in hardware names came at the expense of software and hyperscaler stocks. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) fell 2.5%, making it the largest drag on both the S&P 500 and Nasdaq Composite as measured by index score or market cap impact. If the hardware companies are poised to make more money, their top customers must pay for their products.

Image source: Getty Images.

Oil reversed sharply after Trump's comments on Iran, calling for negotiations. The United States Oil Fund (NYSEMKT: USO) fell 2.7%, erasing most of Wednesday's gains.

The market optimism seems a bit aggressive given that U.S. and Iranian forces are still actively shooting at each other, though. U.S. Central Command hit 90 Iranian sites Thursday, and Iran struck back at bases in Kuwait and Bahrain. Ship traffic through the Strait of Hormuz dropped to 25 vessels on Wednesday, down from 49 the day before. For context, 130 ships used to pass through daily before the war.

Honeywell remained the Dow's biggest loser, falling another 9.2% and erasing 134 points from the index. The stock has now lost roughly 25% over three trading sessions following its aerospace spinoff. Barron's noted Wednesday that the company's updated earnings guidance "isn't as good as it seems."

The bigger picture

Thursday's rally suggests investors are betting on diplomacy over escalation. Trump's dovish comments offered a glimmer of hope, even as both sides continued military strikes. This diplomatic relationship is complicated.

Micron's domestic investment announcement gave investors a fresh reason to buy chip stocks beyond simple relief from oversold conditions. Whether that momentum continues depends on upcoming earnings and sector guidance. The third earnings season of 2026 (covering Q2 results in most cases) starts next week, with hundreds of big-ticket banks and tech stocks posting their financial updates over the coming month.

Anders Bylund has positions in Alphabet and Micron Technology. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Honeywell Technologies, Micron Technology, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.