Semiconductors Lead the Bounce as Rising Yields Keep Market Risk High

The Federal Reserve kept rates unchanged, which initially provided the market with some relief, as there had been a real chance of another increase. That faded during Chair Kevin Warsh’s press conference. He talked firmly about controlling prices but gave little detail, bringing back the concern that the language may not be matched by tougher policy.

The S&P 500 Index (SPX) then fell between 1.5% and 2% in the final hour of trading. Long-term Treasury yields moved sharply higher, and the United States 30 Year Treasury yield reached a new multi-year high. That keeps pressure on housing and mortgage rates.

Geopolitical tension added to the selloff after the president indicated that the United States would strike Iran again, and those strikes happened overnight. Even so, oil is stable today.

Second quarter gross domestic product came in at 1.5%, below the expected 2.1%. Personal Consumption Expenditures inflation matched estimates, so the market response was limited. S&P 500 futures have recovered more than 50% of the late session drop, but not the entire move.

The chart still needs respect. The S&P 500 broke below a rising wedge, although the breakdown has not been confirmed. We already have lower highs, but not a lower low. If the index produces that lower low and confirms the break below the major parallel channel running back to the late 2021 and early 2022 high, the downside could open toward 7,000, the next major technical bounce area.

For now, I still see room for a short-term bounce over the next several days, possibly into early next week. Semiconductor stocks could rebound 10%, 15%, or even 20%. The real test comes afterward. I want to see whether the rebound creates lower highs, fills gaps, and rolls over again.

The United States Dollar Index (DXY) is pulling back slightly, while the United States 10 Year Treasury yield is near 4.7%. The dollar fell even as long-term yields rose because the market appears to believe Warsh may be less aggressive than his language suggests. Debt and inflation concerns are still pushing longer-term rates higher.

The United States 30 Year Treasury yield is now at its highest level since 2007. The United States debt is approaching $40 trillion. Investors are being asked to lend money for 30 years at roughly 5% while inflation runs between 3% and 4%, which helps explain why long term yields keep rising.

The Korea Composite Stock Price Index (KOSPI) gave semiconductor stocks an important sign of stabilization. It had fallen roughly 10% for two straight sessions and is about 40% below its high, but the latest decline was only around 1% to 1.25%. Since SK hynix Inc. (000660) and Samsung Electronics Co., Ltd. (005930) make up about 50% of the index, a KOSPI bounce supports a rebound in United States semiconductors.

SanDisk Corporation (SNDK) fell as low as $9.70 after hours and recovered to $10.92. The upside target remains around $1,300. Arm Holdings plc (ARM) traded as low as $200 after earnings and then recovered about 25%.

Qualcomm Incorporated (QCOM) remains weaker, but the chart is interesting around the $146.87 entry area. High memory prices are limiting smartphone demand, but if those prices come down over the next three to nine months, demand could improve. Additional support sits around $125.

Microsoft Corporation (MSFT) is being rewarded for maintaining steady capital spending and expecting an improvement in cash flow next year. The stock has formed a large V-shaped recovery followed by a bullish flag. A short only becomes interesting near the gap around $460.

Meta Platforms, Inc. (META) is being punished for raising capital spending while cash flow weakens. The key level is $550. If Meta cannot reclaim that trend line, the chart points toward the gap near $400. The closer day trade levels are around $520 and then $500.

Apple Inc. (AAPL) remains the main short setup into earnings because the stock is extended, although it could still move higher first. West Texas Intermediate Crude Oil (WTI) is slightly lower despite the strikes on Iran.

Gold Spot Price (XAU/USD) is pressing against wedge resistance and still has the stronger setup compared with Silver Spot Price (XAG/USD). Gold’s next major cycle peak is projected between 2031 and 2033 at slightly above $10,000. A more aggressive base case places the peak between 2029 and 2031 near $13,000, while more extreme debt issuance and money supply growth could push the target toward $16,000.

Bitcoin (BTC) remains constructive near term, but 67,000 is the key level. A confirmed break above that resistance would strengthen the bullish structure.

Right now, the opportunity is the bounce, especially in semiconductors, but the market still has to prove whether this is a real recovery or just another lower high before a larger move down.