Wall St gains on chip stocks recovery; earnings draw focus

By Ragini Mathur and Avinash P

July 21 (Reuters) – Wall Street’s main indexes rose on Tuesday, as a recovery in semiconductor shares helped shift the focus away from the latest developments in the Middle East, while investors awaited major tech earnings for clues on the future of the AI trade.

Gains in recently battered semiconductor stocks lifted broader markets. The Philadelphia SE Semiconductor Index climbed 4.6%, rising for a second consecutive day.

The index gained some ground after ending Friday more than 20% below its late-June record high, confirming a bear-market decline. The chip gauge also remains up nearly 72% year to date.

SanDisk, Western Digital and Micron Technology were up between 8.3% and 10.8%.

Chip stocks have recently come under heavy pressure as investors question whether this year’s powerful rally in the sector has gone too far and scrutinize the lack of tangible returns on hefty investments by hyperscalers.

On the benchmark S&P 500, information technology led the gains with a 2% rise.

“We expect further volatility in semiconductors as overbought conditions reset, profit-taking pressure emerges, and crowded positioning gets worked out,” said Adam Turnquist, chief technical strategist at LPL Financial.

“Fundamentally, we don’t think anything has really changed.”

Meanwhile, two oil tankers carrying Saudi crude to Asia reversed course in the Red Sea after threats from Yemen’s Iran-aligned Houthis, as a widening Middle East conflict disrupted shipping through two of the world’s most critical energy chokepoints.

Brent crude futures jumped above $90 a barrel, but signs that Tehran and Washington wanted to resume diplomacy helped limit price gains. [O/R]

A senior Iranian official told Reuters on Monday that Tehran had received a proposal from mediators for a 10-day ceasefire in efforts to salvage the interim deal.

At 11:46 a.m. ET, the Dow Jones Industrial Average rose 358.11 points, or 0.69%, to 52,197.37, the S&P 500 gained 58.11 points, or 0.78%, to 7,501.39 and the Nasdaq Composite gained 316.86 points, or 1.24%, to 25,824.93.

The gains came after three consecutive sessions of losses for the main indexes.

Investor focus this week will turn to results from Alphabet and Intel, which could help determine whether the AI trade has further room to run amid elevated profit expectations.

“It’s not just about aggregate capEx numbers now. The next focus point is going to be return on investment and quality of spending, and we think that comes to the forefront in the second half,” Turnquist said.

Adding to the uncertainty, President Donald Trump on Monday unveiled 50% tariffs on a wide range of imports from Canada.

The Financial Times reported that Trump is also expected to impose fresh tariffs on dozens of countries as soon as this week, with his 10% global tariff poised to expire on Friday.

Among early movers, 3M shares gained 9.2% after the industrial giant lifted its full-year profit forecast.

Danaher fell 13.7% after the life sciences firm trimmed its core revenue growth outlook and reported weaker-than-expected revenue in its biotechnology business.

MSCI was down 8.9% after the index provider raised its full-year operating expense forecast despite better-than-expected quarterly revenue.

Genuine Parts dropped 6% after the auto parts distributor lowered its full-year profit outlook.

Advancing issues outnumbered decliners by a 1.38-to-1 ratio on the NYSE and by a 1.57-to-1 ratio on the Nasdaq.

The S&P 500 posted nine new 52-week highs and six new lows, while the Nasdaq Composite recorded 35 new highs and 88 new lows.

(Reporting by Ragini Mathur and Avinash P in Bengaluru; Editing by Maju Samuel and Shinjini Ganguli)