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Chips +2.7%, the average stock +0.4%: a narrow rally that faded

by BigWavesAlso available in Chinese · switch language in the footer

The claim. Monday looked like a broad rally at 11 am and ended as a chip rally. Semiconductors held most of their gain; the average stock kept less than half of its.

Monday's change by index and sector ETF, chips and the equal-weight S&P highlighted, with five takeaways Caption: each bar is the change from Friday's close to Monday's close. Blue: chips (SMH) and the equal-weight S&P 500 (RSP).

How we measured it

Moves are from Alpaca SIP bars, regular session only, Oct 26, 2026. The history uses SPY, SMH and RSP daily bars from Jan 2016 to Oct 23, 2026 (2,717 sessions). A "+1% day" is a session whose high was at least 1% above the prior close. The give-back is the share of that gain lost by the close.

Why

  1. The gap was rare. SMH +2.7%, RSP +0.4%: chips beat the average S&P stock by 2.4 points. About 5% of sessions since 2016 had a bigger gap; the last was Sep 21.
  2. The spark was Anthropic's public S-1. It showed $16.3B of revenue in the six months to June, against $4.6B in all of 2025 (Yahoo Finance live blog, Oct 26). NVDA +2.4%, AVGO +2.3%, AMD +2.8%.
  3. The weight was new megacap stock. Meta is selling about $35B of stock now ($22.5B common, $12.5B mandatory convertible preferred) and plans a ~$60B at-the-market program after that; Alphabet raised about $85B earlier. META -1.9%, GOOGL -1.1%, communication services -1.6%.
  4. The fade was broad, not deep. SPY was +1.02% at 11:00 and closed +0.71%, giving back 30%. The Dow gave back 62%, financials 73%, health care all of it. Chips gave back 21%.
  5. Fades like this are ordinary. Of 559 +1% days since 2016, 36% gave back a quarter or more; the median give-back is 16%. After a 25-50% give-back (92 days) SPY rose the next day 61% of the time and over five days 70% (median +1.0%), against 55% and 62% on all days.

What we expect

  • Base case (to Fri Oct 30): the fade does not mark a top. SPY closes the week above Monday's $765.37 close, in line with the 70% five-day record after similar days. Signal: RSP outperforms SPY on any day this week, a sign the rally is widening.
  • Alternative: Wednesday breaks it. The Fed (Oct 28, a "hawkish pause" expected) or Microsoft and Alphabet earnings the same evening turn the chip lead around, and SPY closes Friday below Friday Oct 23's $759.97. Signal: SMH closes below $527.20, giving back all of Monday.

What would change our mind

  • Supply that keeps coming. If Meta's at-the-market sales start quickly, or another hyperscaler announces an equity raise this week, the megacap drag is a theme rather than a one-day event.
  • The sample. Fades cluster in volatile years, so the better next-day record after a give-back partly reflects those regimes (difference vs days that held: p = 0.047, a weak result). We read it as "no bearish signal", not as a buy signal.

This note is general information and the author's opinion as of the date shown. It is not investment advice and does not consider your situation. The author may hold positions in the securities discussed. Data are from the sources named and may contain errors; past performance does not predict future results. Do your own research.