Key Highlights

  • ASML finished among the top gainers in the Nasdaq-100 on Friday, with no company-specific news found; the stock moved with a semiconductor-equipment rally ahead of its third-quarter results in mid-October.
  • ASML is the only company that makes extreme ultraviolet lithography machines needed to produce the most cutting-edge chips, making it a bellwether for industry Capital spending plans.
  • Equipment peers KLA and Lam Research both climbed, as did smaller names Entegris, Veeco Instruments and Kulicke and Soffa, while Teradyne was the top gainer in the S&P 500.
  • Analysts expect strong double-digit Earnings growth for S&P 500 companies in the third quarter, with 72 of 116 companies issuing positive guidance and the forward P/E at 19.0, below historical averages.

ASML (NASDAQ:ASML) shares climbed on Friday, October 2, as chip-equipment stocks rallied alongside the wider semiconductor sector ahead of the start of earnings season. ASML, the Dutch company that makes the lithography machines used to print circuits onto silicon wafers, finished among the top gainers in the Nasdaq-100. There was no company-specific news; the stock moved with the semiconductor-equipment rally ahead of its third-quarter results in mid-October.

The Only Maker of EUV Machines

ASML is the only company that makes extreme ultraviolet, or EUV, lithography machines, the advanced tools needed to produce the most cutting-edge chips. Every leading chipmaker relies on its equipment, which makes ASML a bellwether for how much the industry plans to spend on new factories.

When investors expect chip Demand to rise, particularly from artificial intelligence, they often buy ASML and its fellow equipment makers in anticipation of bigger orders.

Equipment Stocks Moved Together

Friday's gains spread across the chip-tool group. KLA, which makes inspection and measurement systems, and Lam Research, which supplies etch and deposition equipment, both climbed on the Nasdaq-100. Teradyne, which makes chip-testing machines, was the top gainer in the S&P 500.

Smaller equipment and materials names joined in, with Entegris, Veeco Instruments and Kulicke and Soffa all rising.

The broader chip sector was also strong. Nvidia hit a record high during the session after Morgan Stanley named it its top semiconductor pick, and Broadcom climbed on a report of a roughly $60 billion financing push for chips for Anthropic and other AI companies.

Rates Gave the Rally a Push

The macro catalyst was a weak September jobs report. The US added just 29,000 jobs, far below the roughly 84,000 expected, and revisions trimmed 60,000 jobs from July and August.

That reduced expectations that the Federal Reserve would raise rates again at its October 27-28 meeting, after it hiked on September 16 for the first time since 2023. Lower rate expectations help growth stocks, including capital-equipment suppliers whose orders depend on chipmakers' willingness to invest.

The Nasdaq-100 closed at a record 30,807.93, up 306.37 points. But Treasury yields reversed to close higher after an early dip, with the 10-year near its highest level since 2002.

The Earnings Season Setup

Expectations for the coming reporting season are high. Analysts expect strong double-digit earnings growth for S&P 500 companies in the third quarter, with information technology among the leading sectors. Unusually, analysts raised their third-quarter estimates during the quarter, rather than cutting them as they typically do. There were 72 of 116 companies counted as issuing positive earnings guidance.

On valuation, the S&P 500's forward price-to-earnings ratio stood at 19.0, below its five-year average of 19.8 and its ten-year average of 19.1. For equipment makers, the question is whether chipmakers' spending plans can keep pace with those earnings hopes, since tool orders tend to rise and fall with the industry's confidence about future demand.

ASML's Mid-October Results Are the Key Event

ASML's third-quarter results in mid-October will be the key event, with investors focused on new orders and its outlook for AI-related demand. The broader earnings season begins with PepsiCo on October 8 and Delta on October 9, followed by the big banks on October 13 and 14. The Federal Reserve's October 27-28 meeting will shape the outlook for rate-sensitive growth stocks, including chip-equipment makers.