Key Highlights

  • Microsoft edged higher on Friday with no company-specific news, landing in the middle of the Dow's gainers list while consolidating in a roughly $510 to $520 range.
  • Semiconductors dominated the session: Teradyne was the top S&P 500 gainer while Arm Holdings, Monolithic Power, Microchip and Texas Instruments all jumped on the Nasdaq-100, and Nvidia hit a record high.
  • Software and older tech names lagged by comparison: Salesforce eked out only a small gain, IBM, Adobe and Cadence Design Systems slipped, and Accenture tumbled on profit-taking after its best day ever.
  • The Nasdaq-100 closed at a record 30,807.93, but Treasury yields reversed to close higher after an early drop, with the 10-year near its highest level since 2002, capping enthusiasm for long-duration growth stocks.

Microsoft (NASDAQ:MSFT) joined Friday's tech rally, but its gain looked modest next to the fireworks in semiconductor stocks. Shares edged higher on Friday, October 2, helping the Dow Jones Industrial Average finish 250.40 points up at 51,176.96. But in a session dominated by chipmakers, the software giant was a passenger rather than a driver. No company-specific news was found for Microsoft. The company behind Windows, Office and the Azure cloud platform moved with the wider technology trade, landing in the middle of the Dow's list of gainers. Market commentary described the stock as consolidating in a range of roughly $510 to $520.

Chips Grabbed the Spotlight

The day's real action was in semiconductors. Teradyne was the top gainer in the S&P 500, while Arm Holdings, Monolithic Power, Microchip and Texas Instruments all jumped on the Nasdaq-100. Nvidia was the Dow's best performer and hit a record high during the session after Morgan Stanley named it its top semiconductor pick.

Broadcom climbed after a report said a financing syndicate is amassing about $60 billion to fund chips for Anthropic and other AI companies.

That left software looking sluggish by comparison, as money chased the companies that build AI hardware rather than those that sell programs running on it. Salesforce eked out only a small gain, while IBM, Adobe and Cadence Design Systems slipped. Accenture tumbled as investors took profits after its best day ever on Thursday.

The Macro Push Behind Tech

The catalyst for the tech bounce was a disappointing jobs report. The US added only 29,000 jobs in September against expectations of about 84,000, and July and August were revised down by a combined 60,000. The Unemployment rate ticked up.

The data hit at a sensitive moment. The Federal Reserve, led by Chair Kevin Warsh, raised rates on September 16 for the first time since 2023 as the eight-month-old war with Iran pushed oil and Inflation higher. Friday's numbers caused traders to slash bets on another hike at the October 27-28 meeting.

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

Yet the Bond Market sent a mixed message. Yields fell right after the release and then reversed to close higher, leaving the 10-year Treasury Yield near its highest level since 2002. That kept a lid on enthusiasm for long-duration Growth Stocks like software makers.

A Record for the Nasdaq-100

The Nasdaq-100, where Microsoft is one of the heaviest weights, closed at a record 30,807.93, up 306.37 points. The Nasdaq Composite hit an all-time high during the session but did not close at a record. The S&P 500 rose 56.27 points.

Information technology was the second-best sector in the S&P 500, behind consumer discretionary. Even so, Market Breadth was narrow: only a small minority of S&P 500 stocks traded above their 50-day moving averages.

On a weekly basis, the Nasdaq-100 notched a gain while the Dow finished 651.66 points lower.

AI Infrastructure Spending Remains the Lens

The Fed's October 27-28 meeting will shape how investors value software and other Long-term Growth stories. Before that, Earnings season begins with PepsiCo on October 8 and Delta on October 9, then 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 estimates lifted during the quarter. Spending on AI infrastructure, the theme that powered chip stocks on Friday, will remain the lens through which investors judge cloud providers like Microsoft.