U.S. stocks initially rose significantly in early trading on Monday, but gains subsequently narrowed. A pullback in chip stocks dragged the S&P 500 to near flat, while the Nasdaq Composite turned negative; the Dow Jones Industrial Average, however, maintained a slight increase. The market digested the decline in oil prices due to the temporary easing of tensions in the Middle East, while refocusing on pressure on technology stocks, AI capital expenditures, and a slew of earnings reports this week.
The three major stock indexes diverged during the trading session.
As of approximately 11:25 a.m. ET on Monday, the S&P 500 was at 7409.63, almost unchanged from the previous trading day, after rising as high as 7480.57 earlier in the session. The Dow Jones Industrial Average rose about 180 points, or 0.35%, to 52133.20; the Nasdaq Composite fell about 0.6%.
U.S. stocks opened broadly higher as the U.S. and Iran suspended hostilities, temporarily easing concerns about oil supply disruptions and renewed inflation. However, as the deal progressed, funds shifted back to the chip competition landscape, the pace of AI investment, and upcoming earnings reports from major tech companies.
Falling oil prices support some sectors
International oil prices fell by more than 5%, boosting fuel-cost-sensitive companies such as airlines and cruise lines. Conversely, energy stocks came under pressure as crude oil prices declined.
In the bond market, the yield on the 10-year U.S. Treasury note fell to approximately 4.65% from 4.69% at the close of trading last Friday. The decline in yields eased some of the pressure from high financing costs on stock market valuations and also provided some support for the Dow Jones Industrial Average.
Nvidia and Micron drag down the technology sector
The semiconductor sector was the main weakness during the session. Nvidia fell about 3.9%, and Micron Technology fell more than 6%. The market is focused on the strong performance of Chinese memory chip manufacturer CXMT after its listing in Shanghai, as well as the potential impact of increased competition.
Microsoft and Apple continued to rise during the session, limiting the decline of major stock indexes. However, the divergence within the technology sector indicates that investors are taking a more cautious approach to stock selection ahead of the earnings reports from Microsoft, Meta, Amazon, and Apple this week.
Markets await the Federal Reserve and earnings week
The Federal Reserve will begin its two-day policy meeting this Tuesday and announce its interest rate decision on Wednesday. Meanwhile, inflation data and earnings reports from major technology companies will also be released.
With geopolitical tensions temporarily easing, the market's short-term focus has shifted to corporate earnings and policy signals. As a result, the S&P 500 and Dow Jones indices are likely to continue experiencing significant volatility.
