• The Nasdaq 100 extends its intraday gain to 1.5%, driven by renewed buying in large-cap tech and growth names.
  • Better-than-expected earnings from key constituents and a supportive macroeconomic backdrop fuel the rally.
  • Analysts point to AI and semiconductor stocks as primary leaders, though risks from rate policy remain.

The Nasdaq 100 index accelerated its advance Tuesday, climbing 1.5% as investors piled into technology and growth stocks, capitalizing on a wave of positive earnings reports and easing concerns about interest rates. The move marks a sharp reversal from last week's selloff, with megacap names leading the charge.

According to people familiar with the matter, the rally was sparked by stronger-than-anticipated quarterly results from several heavyweight constituents, particularly in the semiconductor and cloud software sectors. One major chipmaker reported revenue that beat analyst estimates by 3%, while a leading AI firm raised its full-year guidance, citing robust demand for data center products.

"The earnings season has been a bright spot, and the market is rewarding companies that show discipline and growth," said a portfolio manager at a large asset manager, who asked not to be identified because they were not authorized to speak publicly. "We're seeing a flight to quality within tech."

The gains were broad-based, with the Philadelphia Semiconductor Index rising 2.2% and the NYSE FANG+ Index up 1.8%. Apple, Microsoft, and Nvidia each contributed at least 0.3 percentage points to the Nasdaq 100's advance, according to exchange data.

On the macro front, traders are increasingly pricing in a potential rate cut by the Federal Reserve later this year, after a softer-than-expected jobs report last Friday. Fed funds futures now imply a 60% chance of a quarter-point reduction at the September meeting, up from 50% a week ago, according to CME FedWatch.

“Lower rates would be a tailwind for growth stocks, especially those with high valuations and long-duration cash flows,” said an equity strategist at a Wall Street bank. “But the path is still uncertain, and any hawkish surprise could reverse these gains.” The rally also came despite ongoing geopolitical tensions, which have kept some investors cautious. However, market participants said the near-term focus remains on corporate fundamentals and the earnings outlook.

“For now, the earnings story is strong enough to overshadow macro worries,” the portfolio manager added. “But without a deal on the debt ceiling, or if inflation ticks up again, we could see a sharp reversal.”

Correction: A previous version of this article misstated the gain in the Philadelphia Semiconductor Index. It is 2.2%, not 2.5%.