Wall Street has developed an unusual relationship with economic data lately: bad news can sometimes be precisely what stocks need. With inflation remaining stubbornly elevated and the Federal Reserve having raised interest rates for the first time in three years last month, investors have been increasingly worried about how much more monetary tightening the economy can withstand. Higher borrowing costs particularly weigh on technology stocks, where valuations often depend on earnings expected years into the future.
This morning's employment report, however, dramatically changed the interest rate outlook, giving semiconductor stocks like Credo Technology (CRDO) an unexpected catalyst to move higher.
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www.barchart.com Bad Jobs Numbers Become Good Stock Market News
Credo Technology jumped 8.1% in early Friday trading after the Bureau of Labor Statistics released its September employment report at 8:30 a.m. ET.
The economy created just 29,000 jobs last month, missing economists' expectations of approximately 87,000 to 89,000. Worse, the unemployment rate increased to 4.2% from 4.1%, while downward revisions erased another 60,000 jobs from July and August's previously reported totals.
The disappointing numbers nevertheless provided investors with something they desperately wanted: breathing room from the Fed.
CME Group's FedWatch Tool showed the probability of another quarter-point interest-rate hike at the October meeting collapsing from 64.2% a week ago to just 20.5% Friday morning—a 43.7-percentage-point reversal.
That's significant because higher interest rates reduce the present value of expected future earnings, disproportionately pressuring high-growth technology companies. A potentially less aggressive Fed, therefore, makes their valuations easier to justify.
Granted, weaker hiring isn't inherently good economic news. But with inflation keeping 10-Year Treasury yields at their highest level in 24 years, the possibility of avoiding another immediate rate hike was enough to change Friday's market narrative.
Credo Is Riding the Semiconductor Wave
The broader semiconductor market got a much-needed dose of good news from the bad job report. Credo wasn't responding to an earnings announcement, new customer contract, or unexpected corporate development.
The buying extended across the entire chip sector:
Stock or ETF | Early Friday Gain |
| Credo Technology | 8.1% |
| iShares Semiconductor ETF (SOXX) | 3.2% |
| Nvidia (NVDA) | 2.8% |
| Marvell Technology (MRVL) | 2.9% |
Credo's outperformance reflects its position as a higher-beta artificial intelligence connectivity stock—one that typically experiences larger price swings than the overall market. The stock is up 56% year-to-date (YTD) and is 50% higher over the last 12 months.
Most of early Friday's advance developed after the regular stock market opened at 9:30 a.m. rather than immediately following the employment report.
That's consistent with cash-market buying, meaning investors are purchasing actual shares during normal exchange trading hours, rather than trading stock-index futures before the opening bell. An 8.1% move also isn't entirely extraordinary for Credo. Its recent average daily trading range over the past week was approximately 7.3%.
A review of Credo's SEC filings revealed no fresh material announcement following Thursday's close. TD Cowen analyst Sean O'Loughlin reiterated his “Buy” recommendation and $300 price target on CRDO—essentially recycling his Aug. 18 rating—which implies 43% upside potential from yesterday's close at 210.17 per share. The stock sits around $225 per share heading into noon trading on Friday.
In short, this rally appears primarily macroeconomic rather than company-specific. Wall Street, for its part, remains bullish on Credo with a “Strong Buy” recommendation from the 19 analysts covering the stock. Of those, 16 rate it a “Strong Buy,” one analyst rates it a “Moderate Buy,” and two have CRDO stock as a “Hold.” Notably, no analyst thinks the stock is a “Sell,” even after its strong rebound.
www.barchart.com Key Takeaway
Credo remains an attractive AI infrastructure watchlist candidate because its high-speed connectivity technology addresses a critical bottleneck: moving increasingly enormous amounts of data between AI processors.
Friday's early rally, however, doesn't establish that its underlying business became 8% more valuable overnight. It primarily reflects changing interest rate expectations. Investors should distinguish between those two catalysts. A less restrictive Fed could provide further support for Credo's valuation, but the company's longer-term upside still depends on converting AI networking demand into sustained revenue and earnings growth.
Chasing an 8% macro-driven rally carries risks—particularly when the next inflation report could change the Fed's outlook again.
On the date of publication, Rich Duprey did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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