Tech Leads Market Higher as Fed Decision Looms
Nasdaq futures rose 0.6% Wednesday as Nvidia gained on China chip approval news and investors positioned ahead of the Fed's rate decision.
U.S. stocks rose Wednesday morning as technology shares led gains ahead of the Federal Reserve's interest rate decision.
Nasdaq 100 futures climbed 0.62% in pre-market trading, outpacing the S&P 500's 0.48% rise and the Dow's 0.52% gain. The tech-heavy index extended its recovery from last week's selloff, with semiconductor names particularly strong.
Nvidia Gets China Clearance
Nvidia shares rose more than 1% in pre-market after reports that the company received approval to sell specialized AI chips in China and is restarting production of its H2000 processors.
The news represents a partial thaw in the U.S.-China tech standoff. Export restrictions have limited Nvidia's access to the Chinese market since 2023, forcing the company to develop compliance-specific products. The H200 approval suggests the administration is allowing some sales to continue despite broader geopolitical tensions.
China remains a significant market opportunity despite restrictions. Domestic AI development continues at pace, and Chinese hyperscalers need high-end compute even if they can't access the most advanced chips available elsewhere.
Positioning for the Fed
The early rally reflected confidence that the Fed wouldn't deliver a hawkish surprise. Our preview noted that markets had already priced in a hold on rates—the question was whether the dot plot would shift expectations for later in the year.
Treasury yields held steady ahead of the 2:00 p.m. announcement. The 10-year sat at 4.35%, while the 2-year traded at 4.07%. Neither moved significantly from Monday's close, suggesting bond traders weren't expecting drama.
Oil prices added to the cautiously optimistic tone. Brent crude dipped below $99 for the first time in a week, easing some pressure on the energy-driven inflation that's complicated the Fed's calculus. A sustained pullback in oil would give policymakers more room to eventually cut rates.
Sector Leadership
Technology and communication services led sector gains, while defensive utilities and consumer staples lagged. The rotation toward growth reflects positioning for a benign Fed outcome—or at least one that doesn't actively tighten financial conditions further.
Within tech, the semiconductor complex showed broad strength. Besides Nvidia, Micron rose 4.5% ahead of its earnings report after the close. AMD, Broadcom, and Qualcomm each gained more than 1%.
Software names joined the move. Microsoft, Meta, and Alphabet all traded higher, recovering some of the ground lost during last week's market decline.
Economic Data
The February Producer Price Index showed a 0.3% monthly increase, matching economist expectations. Core PPI rose 0.2%, slightly below the 0.3% forecast. The in-line reading avoided adding to inflation concerns ahead of the Fed.
Housing data disappointed. Building permits fell 1.2% month-over-month, and housing starts declined 0.8%. The readings reflect the impact of elevated mortgage rates on residential construction—rates that won't come down until the Fed eventually eases policy.
Looking Ahead
The Fed announcement at 2:00 p.m. and Powell's press conference at 2:30 p.m. will determine whether the morning gains hold. A dot plot showing zero 2026 cuts—the emerging consensus—might cap upside but shouldn't trigger a selloff given current positioning.
Micron's report after the close adds another catalyst. Strong HBM guidance could extend the chip rally into Thursday; any disappointment would test the sector's recent momentum.
For now, traders are betting that neither event delivers a negative surprise. In a market that's survived three consecutive weekly losses, even a neutral outcome might be enough to sustain the bounce.