Wall Street closed mixed on Monday following a rebound in AI trade. However, geopolitical conflicts in the Middle East continued to shake market participants’ confidence. The S&P 500 and the Nasdaq Composite ended in positive territory while the Dow finished in negative territory.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.2% points to close at 50,786.01 after a choppy session. Notably, 13 components of the 30-stock index ended in positive territory while 17 ended in negative territory. At intraday high, the blue-chip index was up more than 410 points.
The tech-heavy Nasdaq Composite finished at 25,929.66, rising 0.9% or 220.23 points due to the strong performance by AI semiconductor giants. The S&P 500 gained 0.3% to finish at 7,405.73. Five out of 11 sectors of the broad-market index ended in positive territory while six finished in negative territory.
The Information Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector SPDR (XLY), the Materials Select Sector SPDR (XLB) and the Energy Select Sector SPDR (XLE) fell 6.7%, 2.1%, 1.9% and 1.8%, respectively. On the other hand, the Consumer Staples Select Sector SPDR (XLP) rose 1.7%.
The fear gauge CBOE Volatility Index (VIX) plummeted 12% to 18.92. A total of 19.50 billion shares were traded on Monday, higher than the last 20-session average of 20.30 billion. Decliners outnumbered advancers on the NYSE by a 1.01-to-1 ratio. On the Nasdaq, a 1.28-to-1 ratio favored advancing issues.
AI Chip Stocks Rebound
AI-powered semiconductor stocks rebounded on Monday recouping the disaster they suffered on Friday to a great extent. AI chip stocks plunged on Friday as the strong jobs data for May along with the solid fundamentals of the U.S. economy, raised concerns that the Fed is unlikely to cut the benchmark interest rate anytime soon this year.
The sticky inflation rate is still a major concern for the central bank. In fact, the CME FedWatch interest rate derivative tool currently shows that there exists more than 50% probability that the central bank will hike the Fed fund rate by the end of this year.
Moreover, to make the situation worse, the yield on the benchmark 10-Year U.S. Treasury Note and 30-Year U.S. Treasury Note climbed more than 4.5% and 5%, respectively. A higher risk-free market interest rate is highly detrimental to the growth of AI-centric companies that need huge amounts of money to cope with an ever-changing competitive world.
Nevertheless, the demand for AI-powered semiconductors likely to remain buoyant as four major hyperscalers have raised their AI capital expenditure budget to $750 billion for 2026. This figure is set to cross $1 trillion next year and is likely to rise further beyond 2027.
Consequently, stock prices of major AI chip and memory developers such as, Broadcom Inc. AVGO, Advanced Micro Devices Inc. AMD, Marvell Technology Inc. MRVL and Micron Technology Inc.MU advanced 2.8%, 5.1%, 9.6% and 9.9%, respectively. Micron currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Geopolitical Conflicts in the Middle East
On June 7, Iran attacked Israel with missiles citing the U.S. naval blockade and Israel’s renewed attack on Lebanon, which violates the ceasefire as reason. In retaliation, on June 8, Israel carried out a large-scale strike on the strategic defense systems of Iran.
This raised fresh concerns about the stability of the ceasefire between the United States and Iran. Consequently, crude oil prices rose. The U.S. benchmark — West Texas Intermediate — rose 0.8% to settle at $91.30. The global benchmark — Brent — rose 1.3% to settle at $94.25.
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