US equities extend rally as AI optimism offsets Middle East tensions
Strong corporate earnings and chipmaker gains drove markets higher, while geopolitical stalemate and consumer demand warnings created sectoral divergence.
US equity markets closed higher on Monday, with the S&P 500 and Nasdaq 100 posting new all-time highs. The S&P 500 rose 0.19%, the Dow Jones Industrial Average increased 0.19%, and the Nasdaq 100 gained 0.29%. June E-mini S&P futures rose 0.18%, while June E-mini Nasdaq futures climbed 0.28%. The rally was underpinned by robust corporate earnings and sustained investor enthusiasm for artificial intelligence infrastructure.
Chipmakers and AI-related stocks led the advance, with Qualcomm rising more than 8% to top Nasdaq 100 gainers. Western Digital, Micron Technology, and Seagate Technology all closed up more than 6%, while Nvidia, Applied Materials, and Analog Devices each gained over 1%. The technology sector’s strength contributed significantly to the broader market’s performance, contrasting with weakness in other areas.
Gains were constrained by rising oil prices and bond yields following the failure of the US and Iran to reach a peace agreement to end the war in the Middle East. President Trump rejected Iran’s latest peace proposal, describing it as “totally unacceptable,” which prolonged the closure of the Strait of Hormuz. June West Texas Intermediate crude oil closed up 2.78%, and June RBOB gasoline rose 2.07%, as the geopolitical standoff exacerbated global supply constraints.
The 10-year T-note yield rose 5 basis points to 4.41%, reflecting concerns that elevated energy prices could force central banks to maintain tighter monetary policy. European government bond yields also moved higher, with the 10-year German Bund yield rising 3.5 basis points to 3.040% and the 10-year UK gilt yield increasing 8.6 basis points to 4.998%. ECB Governing Council member Martin Kocher warned that an interest rate hike could be unavoidable if energy prices do not improve.
Consumer-exposed stocks retreated after Wells Fargo warned of weakening demand. Kohl’s closed down more than 10%, Dollar General fell more than 8%, and Ollie’s Bargain Outlet dropped more than 8%. Airlines and cruise lines also faced pressure due to rising fuel costs, with American Airlines, Alaska Air Group, and Royal Caribbean Cruises all closing down more than 4%. Despite these headwinds, earnings reports have been supportive, with 83% of S&P 500 companies reporting first-quarter results beating estimates.
