Key Highlights

  • IBM slipped on Friday with no company-specific news found, missing out on a rally concentrated in chipmakers and the biggest growth names even as the Dow rose 250.40 points.
  • Nvidia was the Dow's top performer and hit a record high, while Teradyne led the S&P 500 and Arm Holdings, Monolithic Power, Texas Instruments, AMD and Intel all posted big gains; Hewlett Packard Enterprise, Super Micro and Dell rallied on AI-server demand.
  • Older, services-heavy technology names were left behind: Accenture fell sharply on profit-taking after Thursday's record gain, and research firm Gartner also fell.
  • A weak September jobs report cut odds of another Federal Reserve hike, lifting the Nasdaq-100 to a record 30,807.93, though only a small minority of S&P 500 stocks traded above their 50-day moving averages.

IBM (NYSE:IBM) shares slipped on Friday, October 2, finishing among the decliners on the Dow Jones Industrial Average even as the Blue-Chip index rose 250.40 points to 51,176.96 and technology stocks broadly rallied. No company-specific news was found for IBM. The century-old company, which today focuses on hybrid cloud software, consulting and mainframe computers, simply missed out on a rally that was concentrated in chipmakers and the biggest growth names.

Chips Took the Crown

The contrast within tech was stark. Nvidia was the Dow's top performer and hit a record high during the session. Teradyne led the S&P 500, while Arm Holdings, Monolithic Power, Texas Instruments, AMD and Intel all posted big gains. Hewlett Packard Enterprise, Super Micro Computer and Dell rallied on AI-server demand.

Older, services-heavy technology names were left behind. Accenture, which competes with IBM in consulting, was one of the S&P 500's worst performers as investors took profits after its best day ever on Thursday. Research firm Gartner also fell. Within the Dow, Cisco rose and Salesforce posted a small gain, but IBM could not keep up.

Hardware tied to data centres was the clear winner. Hewlett Packard Enterprise raised its networking Revenue outlook and booked a $1.2 billion order from cloud provider Vultr for AMD-based AI racks, while Dell climbed on its record $95 billion AI-server backlog. Dell management described the acceleration as enterprise, meaning ordinary large companies, not just the tech giants, are now ordering AI systems in volume. Enterprise customers are IBM's traditional home turf, but on Friday the market rewarded the hardware suppliers instead.

Why the Rally Was So Selective

The spark for Friday's tech buying was the September jobs report. Employers added just 29,000 jobs against expectations of about 84,000, and July and August were revised down by a combined 60,000. The Unemployment rate ticked up.

That lowered the odds that the Federal Reserve will raise rates again at its October 27-28 meeting, following its September 16 hike, the first since 2023. Investors responded by buying the stocks most closely tied to artificial intelligence, where growth expectations are highest.

Wharton economist Mohamed El-Erian said the report is going to put the Fed definitely on hold for October.

Narrow Leadership

Friday's gains fit that description. The Nasdaq-100 set a record close at 30,807.93 and the S&P 500 gained 56.27 points to 7,722.72, but only a small minority of S&P 500 stocks traded above their 50-day moving averages.

The Bond Market also tempered the mood. Treasury yields fell after the jobs data, then reversed to close higher, leaving the 10-year near its highest level since 2002. Higher yields tend to pressure stock valuations, especially for companies without fast-growing earnings. The Dow, despite Friday's gain, finished the week down 651.66 points.

Watching Whether IBM Can Capture AI Spending

Investors will look for evidence that IBM's software and AI consulting businesses can capture some of the spending now flowing to chipmakers. Earnings season opens with PepsiCo on October 8 and Delta on October 9, followed by the big banks on October 13 and 14. Analysts expect strong double-digit earnings growth for the S&P 500 in the third quarter, with information technology among the leading sectors. The Federal Reserve's October 27-28 meeting will be the next major test for tech valuations.