Key Highlights

● SanDisk inched higher, lagging well behind Western Digital and Seagate, which rebounded sharply from Friday's selloff.

● Bernstein called the Toshiba capacity scare "a storm in a teacup" and recommended the hard-drive makers specifically.

● SanDisk's focus on flash memory, rather than spinning hard drives, meant the analyst defense didn't apply to it as directly.

SanDisk inched higher on Monday, Oct. 5, lagging far behind hard-drive makers Western Digital and Seagate, which rebounded sharply after Bernstein called Friday's selloff "a storm in a teacup."

Left behind in the rebound

SanDisk (NASDAQ:SNDK) inched higher on the Nasdaq-100 on Monday, but it lagged well behind the hard-drive makers. No company-specific news was found for SanDisk.

The big story in data storage was a rebound in Western Digital (NASDAQ:WDC) and Seagate (NASDAQ:STX). Western Digital rallied to about $442.44 and Seagate climbed to about $891.76. Both had tumbled on Friday on fears that Toshiba would expand its hard-drive capacity.

SanDisk, which focuses on flash memory rather than spinning hard drives, did not share in the rebound to the same degree.

The Toshiba scare

Friday's selloff was driven by worries that Toshiba was adding capacity, which could mean more Supply and pressure on prices. On Monday, several big Wall Street firms pushed back on that concern.

Bernstein called the selloff "a storm in a teacup" and recommended buying Western Digital and Seagate. Citi and Morgan Stanley agreed.

Morgan Stanley said Toshiba "lacks leading-edge capacity and the heat-assisted magnetic recording technology." Heat-assisted magnetic recording is a technology that allows hard drives to store far more data, and it is important for the high-capacity drives used in data centers. Goldman Sachs also named Seagate a top tactical pick.

Why the split

The analyst comments were aimed squarely at hard-drive makers. Because SanDisk focuses on flash memory, the analysts' defense of the hard-drive makers did not apply to it as directly.

Both hard drives and flash storage benefit from the AI build-out, which requires huge amounts of data storage. But on Monday, the rebound trade belonged to the drive makers.

The broader tech sector was strong but mixed. Nvidia (NASDAQ:NVDA) rose to a record close and TSMC's (NYSE:TSM) US-listed shares climbed. Intel (NASDAQ:INTC) fell after Elon Musk confirmed early talks for TSMC to join his Terafab venture, and GlobalFoundries (NASDAQ:GFS) slid after a downgrade.

Records for the Nasdaq

The Nasdaq-100 closed at a record 31,076.44, and the Nasdaq Composite jumped 286.45 points to a record 27,477.31. The S&P 500 added 51.23 points to 7,773.95, just shy of its summer record. The Dow rose 90.94 points to 51,267.90.

That came despite the 10-year Treasury Yield rising to its highest level since 2002. The ISM services prices-paid index hit 74.0, the highest since July 2022. Friday's weak September jobs report, with payrolls up just 29,000, cut bets on an October Fed hike to roughly one in four or less.

Daniela Hathorn, senior market analyst at Capital.com, said: "growth stocks are rallying because Fed expectations have softened, while the Risk-Free Rate against which those valuations are judged remains exceptionally high."

Western Digital's gain on Monday followed a steep drop on Friday, so its rebound recovered only part of the ground lost. The VIX also rose to 15.52, a sign some investors were still hedging despite records on the Nasdaq.

What to watch

Storage investors will watch for further analyst commentary on Toshiba's capacity plans and on Demand for data-center storage. SanDisk's next Quarterly Report will be the next company-specific catalyst.

On the macro front, minutes from the Fed's September meeting are due Wednesday, Oct. 7 at 2 p.m. ET, and the Fed meets again Oct. 27 to 28. Earnings season begins with the big banks from Oct. 13.