The S&P 500 rose 0.72% on Monday as chip stocks rebounded, leaving the index about 1% below its June 2 record. Broadcom led the advance after extending a custom-chip deal with Apple, while a strong earnings season is expected to keep AI names in demand.
A rebound in artificial-intelligence chip stocks pushed the S&P 500 0.72% higher to 7,537.43 points on Monday, leaving the index about 1% below its record close from June 2. Investors bought AI-linked companies expected to drive a strong second-quarter earnings season, even as declining stocks outnumbered rising ones within the index by a 1.3-to-one ratio.
Broadcom leads the chip recovery
Broadcom jumped 3.7% after it and Apple agreed to extend a deal through 2031 to develop and supply a range of custom chips. The S&P 500 information technology sector index climbed 1.3%, while the Philadelphia SE Semiconductor index gained 2.2% after two straight sessions of losses.
The rally did not reach every corner of the market. Microsoft shares fell almost 1% after the company said it was cutting about 2.1% of its workforce, or roughly 4,800 jobs. Jake Dollarhide, chief executive of Longbow Asset Management, warned the advance may not last. According to Reuters: "I think it's a very tenuous rally."
Earnings and the Fed in focus
The gains left the Nasdaq up 1.12% to 26,121.16 points, while the Dow Jones Industrial Average rose 0.29% to 53,055.91 points. With major companies set to begin reporting in the next few days, analysts expect S&P 500 firms to lift earnings by an aggregate 24% year-over-year in the second quarter, with tech sector earnings projected to jump around 65%.
Monetary policy still hangs over the outlook. After a cooler-than-expected jobs report last week, traders see a 25% chance of a 25-basis-point rate hike at the July 29 meeting, according to CME's FedWatch tool. A separate test arrives later this week, when South Korea's SK Hynix plans to raise US$28 billion in a Nasdaq listing that will gauge investor appetite for AI.
Sources: Reuters, BNN Bloomberg
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