U.S. stocks were mixed on Monday as a selloff in chip and AI-linked names held back the market while banks, retailers and healthcare stocks climbed. A weekend pause in U.S.–Iran military strikes sent West Texas Intermediate crude down about 7%, easing inflation concerns as the Federal Reserve opens its two-day July meeting on Tuesday.
Stocks were mixed to start the week as the selloff in chip stocks and AI beneficiaries held back the market’s attempt at a rally. Sentiment in semiconductor stocks remained low, and the Philadelphia Stock Exchange Semiconductor Index pulled back roughly 4% for the second straight session.
That leaves the index down about 23% from its highest close on June 22, which was two days before Micron’s last earnings report.
Cheaper oil lifts financials, retail and healthcare
The market got welcome news over the weekend after the U.S. and Iran paused military strikes. Cooling geopolitical tensions sent U.S. oil prices down about 7%, with West Texas Intermediate crude falling back to roughly $83 per barrel.
Falling energy prices helped ease inflation concerns, fueling a rally in bond prices. Inversely, the 10-year Treasury yield dropped but remained elevated near 4.65%.
Sectors that would be expected to benefit from lower oil prices led the market higher. Banks and financials performed well, with the State Street Financial Select Sector ETF (XLF) hitting a new intraday, all-time high, while Capital One bounced back from last week’s post-earnings decline and Wells Fargo traded higher.
Many retail and consumer stocks rallied, among them TJX Companies, Starbucks and Costco. Healthcare outperformed as well, with Johnson & Johnson hitting a new all-time high. Its shares are now up about $20, or roughly 8%, since falling after earnings two weeks ago.
Circular-deal fears hit the AI trade
Reports that Nvidia is in talks with OpenAI to provide a $250 billion backstop on one of the AI lab’s data center projects renewed fears about circular deals. Nvidia lost 5%.
The AI trade also came under pressure on concerns that China is closing the gap in the artificial intelligence race with cheaper models and semiconductor manufacturing tools. Alphabet signaled on its earnings call last week that its capital expenditures will continue to rise into 2027, and earnings from Meta Platforms, Microsoft and Amazon later this week could tell a similar story.
Fed decision follows a wave of earnings
The recent volatility in energy prices is likely to fuel debate over the future path of monetary policy as the Federal Reserve begins its two-day July meeting on Tuesday, with the interest rate decision due Wednesday afternoon. According to the CME FedWatch tool, the market sees just over a 60% chance of no change in rates and a nearly 40% chance of a hike.
Before that, earnings arrive from Nucor, Celestica, Universal Health Services and Amkor Technology after the bell, then Corning and Boeing before Tuesday’s open. The Conference Board also releases its latest consumer confidence reading.
Source: CNBC
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