The S&P 500 and the Nasdaq rose on Monday as chip stocks ??recovered from last week’s sharp selloff, while investors looked ahead to earnings from major technology companies that have driven Wall Street’s AI-fueled rally.
Alphabet added to the gains, rising 2.9 per cent after a report said its Google unit is developing a Gemini-integrated server chip aimed at improving AI efficiency and easing computing-capacity constraints.
The second-quarter earnings season will pick up pace this week, with results due from Alphabet, Tesla, Intel and IBM.
Investors will focus closely on Intel and Texas Instruments for any encouraging signs after a recent slide in semiconductor shares.
A surge in AI capital spending by hyperscalers has been a major driver behind this year’s market gains, lifting chip stocks and other companies that are seen as the beneficiaries of the buildout, and helping Wall Street climb to record levels.
But last week’s selloff raised concerns that valuations had run too far, too fast.
The Philadelphia SE Semiconductor Index ended Friday more than 20 per cent below its late-June record high, confirming a bear-market decline. The gauge was up 1.9 per cent on Monday.
“Our expectation is that earnings will continue to be good. It’s just a little bit harder to tell if they will be better than expected because there’s such a high bar at this point,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
Markets are expecting S&P 500 earnings growth of 26 per cent for the second quarter, year-on-year, up from an earlier estimate of 23.7 per cent, according to data compiled by LSEG.
At 11:49 a.m. ET, the Dow Jones Industrial Average fell 123.88 points, or 0.24 per cent, to 52,022.54, the S&P 500 gained 20.88 points, or 0.28 per cent, to 7,478.57 and the Nasdaq Composite gained 147.22 points, or 0.58 per cent, to 25,667.46.
Memory chipmakers were leading the gains among semiconductor stocks. Micron Technology and SanDisk were up 4.8 per cent and 6 per cent, respectively.
The S&P 500’s information technology and communication services sector gained 0.8 per cent and 1.8 per cent, respectively.
Last week’s declines in major U.S. ??indexes came despite benign inflation data, which eased some concerns about a Federal Reserve rate increase this month, and a solid start to the second-quarter earnings season from major U.S. banks.
Traders now see a roughly 14 per cent chance of a quarter-point rate increase at the Fed’s July meeting and a 55 per cent chance of a similar move in September, according to CME’s FedWatch tool.
“Higher interest rates could be a real Achilles’ heel for the market. If that were to happen, you have to question valuations, and that could impact the durability of this rally,” Zaccarelli said.
Investors were also tracking developments in the U.S.-Israeli war with Iran after a recent escalation in the nearly five-month-old conflict revived inflation worries. In the latest flare-up, Yemen’s Iran-aligned Houthis said they were imposing a naval blockade on Saudi Arabia.
Among other market movers, Domino’s Pizza was up 1.0 per cent after the pizza chain’s quarterly revenue edged past Wall Street estimates.
Advancing issues outnumbered decliners by a 1.17-to-1 ratio on the NYSE, and by a 1.37-to-1 ratio on the Nasdaq.
The S&P 500 posted nine new 52-week highs and three new lows, while the Nasdaq Composite recorded 39 new highs and 129 new lows.
