The S&P 500 and Nasdaq closed firmly higher on Monday as renewed enthusiasm for artificial intelligence (AI) stocks fuelled gains across the technology sector, with Broadcom leading advances after extending its long-term chip partnership with Apple.
The benchmark S&P 500 rose 0.72% to finish at 7,537.43, while the Nasdaq Composite climbed 1.12% to 26,121.16. The Dow Jones Industrial Average also ended higher, adding 0.29% to 53,055.91.
Technology shares outperformed ahead of the second quarter earnings season, which investors expect to be driven by continued strength in AI-related businesses. Analysts tracked by LSEG forecast aggregate earnings growth of 24% for S&P 500 companies during the quarter, with the technology sector expected to deliver a much stronger 65% increase.
Broadcom surged 3.7% after announcing it had extended its custom chip development and supply agreement with Apple through 2031. The news lifted semiconductor stocks broadly, with the Philadelphia Semiconductor Index gaining 2.2% after two consecutive sessions of losses. The S&P 500 information technology index also advanced 1.3%.
Investor appetite for AI-related chipmakers remains strong, with South Korea’s SK Hynix set to debut on the Nasdaq later this week as demand for semiconductor investments continues to accelerate.
Jake Dollarhide, chief executive officer of Longbow Asset Management, said the current rally remained heavily concentrated in technology.
“This is a market that’s leaving a lot of people out. If you’re not in certain tech names, if you’re not in semiconductors, then you’re basically missing the entire rally. I think it’s a very tenuous rally. There is a risk, particularly if the Fed continues to see higher interest rates for longer.”
Despite the positive close for the broader market, decliners outnumbered gainers within the S&P 500 by roughly 1.3 to one, highlighting the narrow nature of the rally. The benchmark index is now up about 10% for the year but remains around 1% below the record closing high reached on June 2.
Economic data released during the session showed the US services sector remained resilient. The Institute for Supply Management’s non-manufacturing purchasing managers index eased slightly to 54.0 in June, matching market expectations.
Attention is also turning towards the US Federal Reserve. Following weaker-than-expected June employment data last week, traders now see a 25% probability of a 25 basis point interest rate increase at the Fed’s July 29 meeting, according to CME FedWatch. Investors are also awaiting the release of minutes from the central bank’s latest policy meeting on Wednesday for further clues on the interest rate outlook.
Among individual stocks, Microsoft slipped nearly 1% after announcing plans to cut approximately 4,800 jobs, equivalent to about 2.1% of its workforce. Thomas Hayes, chairman of Great Hill Capital LLC, said investors viewed the move negatively.
“What the market is saying is Microsoft can’t afford all of its CapEx and there’s not a clear return on invested capital yet. Therefore, laying off people in lieu of moderating CapEx spend is perceived as a negative.”
Elsewhere, O’Reilly Automotive tumbled 6.7% after reports it had submitted a cash bid to acquire Genuine Parts’ automotive business, while Genuine Parts fell about 3%.
SpaceX eased 1% despite recording more than US$26 billion worth of shares traded, most of it in the final seconds of the session, ahead of its scheduled inclusion in the Nasdaq 100 on Tuesday.
Trading activity remained relatively subdued, with about 16.8 billion shares changing hands across US exchanges, well below the 20-session average of 23.4 billion shares.
Reuters
