US Markets Close Mixed as Tech Optimism and Middle East Tensions Clash
Investors navigate a week of mixed signals, buoyed by AI infrastructure demand but weighed down by rising crude oil prices and stalled diplomatic efforts in the Middle East.
US equity markets closed with mixed results on Monday, as the S&P 500 and Nasdaq 100 posted new all-time highs driven by optimism surrounding artificial intelligence infrastructure and upcoming technology earnings. In contrast, the Dow Jones Industrial Average edged slightly lower, reflecting the broader volatility that characterised the session.
The rally in the major indices was underpinned by strong sentiment regarding the demand for AI infrastructure, with the "Magnificent Seven" technology firms expected to report quarterly results later in the week. Specific movers included Sandisk, which surged more than 8 per cent, and Micron Technology, which rose over 5 per cent following buy ratings from Melius Research. However, not all chipmakers participated in the gain; ARM Holdings fell more than 8 per cent and Advanced Micro Devices dropped over 3 per cent, despite recent sector strength.
Market gains were tempered by a 2 per cent rally in WTI crude oil prices, which raised inflation expectations and weighed on sectors such as airlines and cruise lines. The spike in energy costs followed President Trump's cancellation of planned negotiations with Iran in Pakistan, where he stated that Iran had offered insufficient concessions. Iranian officials have since refused imposed negotiations under threat, maintaining that they will not engage while a US naval blockade remains in force.
Geopolitical tensions remain acute as the Strait of Hormuz stays effectively closed due to US naval blockades and Iranian resistance. This situation threatens global energy supplies, as approximately a fifth of the world's oil and liquefied natural gas transits through the waterway. While Iran has reportedly offered a new proposal to reopen the strait and end the war, the White House is currently discussing the plan, which suggests deferring nuclear negotiations until after a blockade is lifted.
In Washington, prospects for the Senate confirmation of Federal Reserve Chair nominee Kevin Warsh improved after opposition from Senator Thom Tillis was withdrawn. Tillis had previously demanded the Justice Department drop its criminal investigation into the Fed's building renovation overspending, a move the department subsequently made. With the Senate Banking Committee due to vote on the appointment, markets are currently pricing in a 0 per cent chance of a rate hike at the upcoming Federal Open Market Committee meeting.
Elsewhere in the markets, health insurers rallied with Centene up more than 4 per cent and Elevance Health and Humana rising over 3 per cent. Conversely, overseas markets saw mixed performance, with Japan's Nikkei Stock 225 rallying to a new record high while the Euro Stoxx 50 fell slightly. Treasury yields retreated on Monday as investors reacted to the increase in crude oil prices, which boosted inflation expectations for the ten-year note.
