S&P 500 Extends Rally as Fed Holds Steady — Disney, Arm Soar on Earnings, Semis Hit All-Time Highs

U.S. equities rallied into the close on Thursday as the Federal Reserve held interest rates steady at 4.25–4.50% and Chair Jerome Powell signaled a “patient” approach that markets interpreted as leaning dovish. The S&P 500 gained 0.73% to close at 7,337.45, its third consecutive session advance, putting the index within 0.47% of its all-time high set in March. The Nasdaq Composite surged 1.35% to 25,854.80, powered by semiconductors hitting fresh records and a cluster of earnings-driven mega-moves.

The session was defined by two catalysts: the 2:00 PM ET Fed announcement followed by Powell’s press conference, and a wave of earnings beats from Disney, Arm Holdings, Palantir, and Intel that lit up the tape from the open. Markets opened firmly higher on the overnight earnings momentum, consolidated through midday ahead of the Fed, then re-accelerated in the final two hours as Powell made clear the committee sees no urgency to tighten further despite sticky inflation metrics.

The Philadelphia Semiconductor Index closed at an all-time high for the second consecutive session, extending Wednesday’s AMD-fueled breakout. The VIX collapsed below 15.20 for the first time in six weeks, signaling peak complacency heading into Friday’s session.

Closing Scoreboard

What Happened

Thursday’s session had an unusually clear two-act structure. The pre-Fed half saw equities grind higher on strong earnings momentum from Wednesday evening’s reports: Disney’s streaming profitability breakthrough, Arm’s royalty revenue surge, and the overnight confirmation that Apple is actively diversifying its chip supply chain toward Intel. The S&P 500 was already up 0.45% heading into the 2:00 PM announcement.

The Federal Open Market Committee held the federal funds rate at the 4.25–4.50% target range as universally expected. The statement acknowledged that “inflation remains somewhat elevated” but added language noting that “the labor market has come into better balance,” a subtle but meaningful shift from March’s statement. The updated dot plot held steady at a median of two 25-basis-point cuts for 2026, with September and December remaining the consensus timing.

Powell’s press conference sealed the dovish interpretation. He used the word “patient” four times and emphasized that the committee is in no rush to act in either direction, effectively dismissing rate-hike speculation that had briefly surfaced in April. The 2-year yield fell 5 basis points to 3.82% during the presser, while the dollar index dropped to 99.32—its weakest level in three weeks.

Meanwhile, the earnings-driven rally in semiconductors continued unabated. The Philadelphia Semiconductor Index rose 2.8% to a fresh all-time high, extending Wednesday’s 4.6% surge following AMD’s blowout report. With AMD, Arm, Intel, and Nvidia all contributing, the semiconductor ETF (SMH) has gained 7.4% in just two sessions—a pace not seen since the October 2023 AI breakout.

Mega-Cap and Key Movers

Sector Breakdown

The growth-over-value rotation that defined Wednesday’s session intensified on Thursday. Consumer discretionary led all sectors for the second straight day, lifted by Disney’s +5.8% surge which added roughly 60 points to the Dow. Technology followed closely, propelled by the semiconductor complex’s relentless march higher. Energy was the lone significant laggard as WTI crude slipped below $97 for the third consecutive session amid persistent demand-side concerns and rising U.S. inventories.

Global Markets

Asia-Pacific

Asian markets closed mixed ahead of the Fed decision. Japan’s Nikkei 225 rose 0.4% to 39,820, supported by semiconductor exporters tracking AMD’s overnight surge. China’s CSI 300 was flat at 4,285 as investors awaited trade negotiation updates. Hong Kong’s Hang Seng gained 0.6% to 22,540 on tech strength. Australia’s ASX 200 dipped 0.2% as commodity prices continued to soften.

Europe

European markets closed higher before the Fed announcement. The STOXX 600 gained 0.5% to 542.30. Germany’s DAX rose 0.7% to 23,180, while France’s CAC 40 added 0.4% to 7,860. The UK’s FTSE 100 underperformed, rising just 0.2% to 8,520 as gilt market volatility persisted following Wednesday’s spike to the highest yields since 1998 on the 30-year benchmark.

Fixed Income and Commodities

The Treasury rally accelerated following Powell’s press conference. The 10-year yield fell 5 basis points to 4.32%, its lowest close since April 22. The 2-year yield dropped 5 basis points to 3.82%, keeping the 2s/10s curve steepness at +50 basis points. The move reflected markets cementing September as the most likely date for the first rate cut, with December as the follow-up.

The dollar index dropped 0.28% to 99.32, extending losses as the dovish Fed rhetoric reduced the dollar’s yield advantage. EUR/USD climbed to 1.1812, approaching the April highs. The yen strengthened modestly as the narrowing rate differential favored carry unwinds.

Gold benefited from the weaker dollar and dovish Fed posture, rising $20.20 to $4,558.40. The precious metal remains in a structural uptrend, supported by central bank buying and de-dollarization flows. WTI crude fell $0.57 to $96.85, pressured by the EIA reporting a larger-than-expected inventory build of 4.2 million barrels and ongoing concerns about Chinese demand recovery stalling.

Corporate News

Earnings Highlights

• Disney (DIS): Reported after Wednesday’s close. Q2 EPS $1.45 beat the $1.32 consensus by 10%. Disney+ added 8.1M subscribers and generated $350M in streaming profit—the segment’s most profitable quarter ever. Parks revenue rose 8% on pricing power. Management raised full-year EPS guidance to $5.50–$5.70.
• Arm Holdings (ARM): Q4 revenue of $1.24B topped the $1.18B consensus. Royalty revenue surged 21% year-over-year to $608M as AI chip design licenses accelerated. Guided Q1 revenue above consensus, signaling sustained architecture demand.
• Palantir (PLTR): Reported before Thursday’s open. Q1 revenue $920M vs $885M est (+21% YoY). EPS $0.14 vs $0.12 est. Government revenue +32% YoY to $462M. Commercial revenue +15% YoY. Raised FY26 revenue guidance to $3.78B. CEO Karp highlighted “unprecedented” demand for Artificial Intelligence Platform (AIP) contracts across DoD.

M&A and Analyst Actions

• Intel (INTC): Multiple reports confirmed Apple is in advanced discussions to diversify its chip manufacturing to Intel Foundry Services for select Mac processors beginning in 2027. Shares surged 10.2% as the partnership would validate Intel’s foundry turnaround strategy.
• Anthropic: Closed a $3.5B Series D at a $61.5B valuation, making it the second most valuable AI startup behind OpenAI. Amazon participated as the largest investor.
• Morgan Stanley raised its Nvidia price target to $320 from $285, citing data center revenue acceleration in Q2.
• Goldman Sachs upgraded Intel to Buy from Neutral, setting a $42 target on the Apple foundry catalyst.

Economic Data

Jobless claims came in slightly better than expected at 225K, continuing the gradual improvement that supports the Fed’s “soft landing achieved” narrative. Continuing claims also improved, falling to 1.82M from 1.85M prior. The more notable data point was consumer credit, which grew just $8.2B in March versus the $12.0B consensus—the weakest expansion since October 2025. This suggests consumers are pulling back on borrowing despite employment stability, a dynamic Powell acknowledged as warranting “continued monitoring.”

After-Hours Movers

The AlphaEdge Take

Thursday’s session was the kind of day that bull markets are made of: a dovish central bank clearing the path, blockbuster earnings providing the fuel, and technical momentum doing the rest. The S&P 500 at 7,337 is now just 35 points from its all-time high of 7,372, and the path of least resistance heading into Friday is clearly higher.

But it’s worth noting what’s happening beneath the surface. The consumer credit miss—the weakest expansion in seven months—tells a story the equity market is choosing to ignore right now. So does the continued slide in crude oil, which despite all the geopolitical premium baked in earlier this year, can’t hold above $97. These are not signs of an economy overheating; they’re signs of an economy that’s quietly decelerating while the stock market sprints toward record territory on a wave of AI-fueled optimism.

The semiconductor rally is legitimate—AMD’s data center numbers are real, Arm’s royalty growth is structural, and Intel’s foundry validation from Apple is a potential industry inflection. But two consecutive days of 3–5% gains in the SMH put the sector in historically extended territory. We would not be surprised to see some profit-taking on Friday, particularly if the morning brings any hawkish Fedspeak from regional presidents seeking to temper Powell’s dovish messaging.

Our base case for Friday: the market opens flat-to-higher as the overnight earnings reactions from Trade Desk and Airbnb support sentiment, but resistance near the all-time high at 7,372 may cap upside absent a fresh catalyst. The VIX below 15.20 signals extreme complacency—the kind that often precedes short-lived pullbacks. S&P 500 range: 7,305–7,375.