US equities closed higher on Monday, extending a recent rally and lifting major indexes toward record levels as investors looked through a mixed stream of economic data and focused on the latest momentum in technology and semiconductors. The S&P 500 finished up 0.72%, the Dow Jones Industrial Average gained 0.29%, and the Nasdaq 100 rose 1.26%, with chip and AI infrastructure names leading the move.
Market participants also weighed support from US services-sector activity that remained expansionary, along with carryover optimism tied to last Thursday’s smaller-than-expected nonfarm payrolls report. Ahead of the next set of policy and growth signals, traders continued to price interest-rate expectations cautiously.
Key takeaways
- Indexes gained: The S&P 500 rose 0.72%, the Dow added 0.29%, and the Nasdaq 100 advanced 1.26%.
- Catalyst: A stronger-than-expected employment component in the ISM services report and strength in semiconductor and AI-related stocks helped drive the session.
- Rates remained in focus: Bond markets saw modest support after last week’s payroll data, even as the employment sub-index in ISM pointed to resilient labor demand.
- Earnings expectations stayed bullish: Bloomberg Intelligence forecasts pointed to continued earnings growth, with AI-related infrastructure expected to play a large role.
- Energy was a counterweight: WTI crude fell as OPEC+ agreed to increase output and Saudi Arabia and the UAE lifted shipments.
What drove the move
Monday’s rally was largely powered by technology exposure, particularly semiconductors and AI infrastructure. The iShares Semiconductor ETF rose more than 2%, while several large chip and hardware names closed sharply higher, including Western Digital, Advanced Micro Devices, Seagate Technology, Qualcomm, and ON Semiconductor.
Behind the broad advance, investors also anchored sentiment to updated US business activity data. According to the ISM report, the June services index fell 0.5 points to 54.0, in line with expectations. The price-paid sub-index eased to 67.7 from 71.3 in May, slightly above expectations, suggesting cost pressures were not intensifying. At the same time, the employment sub-index increased 3.3 points to 51.2, above expectations, a detail that helped explain why the market could absorb both cooling prices and continued hiring momentum.
Additionally, the market carried forward optimism from last Thursday’s labor data, which was smaller than expected and supported speculation that the Federal Reserve may not need to raise rates soon.
Market reaction and sector implications
Beyond the headline index gains, investors appeared to concentrate on where near-term earnings momentum is most visible. Bloomberg Intelligence data compiled for the quarter suggested Q2 earnings could rise about 23%, with a pace of growth approaching the strong start to the year. The same outlook pointed to AI spending as a primary driver, with AI infrastructure stocks expected to account for nearly 60% of S&P 500 earnings-per-share growth in the quarter.
Energy markets moved in the opposite direction. WTI crude oil edged down 0.2% as Saudi Arabia and the United Arab Emirates increased shipments toward nearly pre-war levels. Separately, OPEC+ agreed to add 188,000 barrels per day to its output target starting August 1, consistent with plans to unwind production curbs implemented in previous years.
In rate-sensitive markets, the US Treasury complex showed modest support. According to the latest session pricing, September 10-year T-notes closed higher, and the 10-year yield fell 0.6 basis points to 4.477%. The move aligned with carryover demand for duration linked to last week’s weaker-than-expected payrolls report. However, gains were described as tempered by the ISM employment sub-index’s rise, which can be interpreted as a reminder that labor-market strength may keep policy expectations supported.
At the same time, supply dynamics remained a factor. The Treasury is set to auction $119 billion in T-notes and T-bonds during the week, starting with a $58 billion 3-year note auction on Tuesday, which traders typically monitor for potential pressure on bond prices.
Company moves and policy pricing
Individual stock performance reinforced the market’s theme of AI and semiconductors. Among notable gainers, Tesla rose more than 6%, while Meta Platforms and Alphabet each finished higher. Apple gained more than 1% and Amazon added 0.61%, and Nvidia closed up 0.40%. Microsoft bucked the trend, falling 0.96%, after the company said its Xbox division plans to eliminate 3,200 jobs, representing 20% of the workforce, over the next year.
Cybersecurity stocks also supported the broader tone, with Okta, Fortinet, CrowdStrike, Palo Alto Networks, Zscaler, and Cloudflare all closing higher. Several analysts’ or company-driven catalysts appeared to underpin single-name moves: Axon Enterprise advanced after Needham & Co raised its price target; Macy’s climbed following a Morgan Stanley upgrade; and US Bancorp rose after Jeffries upgraded the shares from hold to buy.
Elsewhere, some declines reflected company-specific developments. ZIM fell more than 7% after Ynet reported remarks from Israeli Prime Minister Netanyahu indicating that the proposed sale of the company was “not on the agenda.” O’Reilly Automotive dropped more than 6% after a report that it was interested in acquiring Genuine Parts Co’s auto-parts segment. Constellation Brands declined more than 4% after Morgan Stanley flagged potential Q3 demand risk for beer sales following Brazil and Mexico’s defeat in the World Cup.
On the macro calendar, investors continued to price near-term rate risk. The markets were discounting a 25% chance of a 25 basis-point rate hike at the next FOMC meeting on July 28-29.
Bigger picture
Monday’s session underscored a market that is still balancing two competing forces: evidence that inflation pressure is not accelerating, and signals that labor demand remains resilient. For equities, the rally’s leadership suggests investors remain willing to pay for earnings visibility tied to AI-related capex and infrastructure spending.
Looking ahead, investors will likely focus on the next tranche of economic data and on policy signals around upcoming Federal Reserve communication. With Treasury auctions underway this week and major indexes hovering near record territory, the next move could hinge on whether incoming data continues to validate a “cooling prices, stable growth” narrative without reigniting rate-hike expectations.
