US equities kicked off the week with a broad rally on Monday, as a sharp drop in crude prices and a de-escalation in Middle East tensions helped restore risk appetite. The Dow Jones Industrial Average surged 640 points, or roughly 1.2%, while the S&P 500 advanced 0.6% and the Nasdaq Composite added 0.5%.
The move came after President Donald Trump said he had called off planned strikes against Iran and indicated that diplomatic talks would resume. Although Tehran disputed the timing of those discussions, the prospect of reduced geopolitical friction weighed heavily on energy markets. Brent crude fell nearly 5%, and West Texas Intermediate dropped more than 6%.
Treasury yields also eased, with the 10-year note slipping about 7 basis points to around 4.67%, while the two-year yield declined roughly 5 basis points. The pullback in yields reflected moderating inflation concerns, a relief for investors who had been bracing for persistently high price pressures.
The rally follows a volatile July on Wall Street, marked by worries over artificial intelligence spending, expectations for further Federal Reserve rate hikes, and escalating tensions in the Middle East. Lower energy prices are seen as a potential buffer against inflation, which could give the Fed more flexibility in its policy path.
Traders are currently pricing in a 62.7% probability of a 25-basis-point rate increase at the September meeting, according to CME FedWatch data. The week ahead brings several key economic releases, including manufacturing data and the closely watched nonfarm payrolls report due Friday. Economists expect the US economy added about 87,500 jobs in July, up from 57,000 in June, while the unemployment rate is forecast to tick up to 4.3%.
On the earnings front, attention shifts to another wave of technology results. After strong quarterly reports from Microsoft and Amazon eased concerns about AI-related capital expenditures, investors are now focusing on SpaceX's first earnings since its public listing, with particular scrutiny on Starlink's profitability and AI spending. The stock has traded below its IPO price in recent weeks.
Other notable reporters this week include Palantir, Advanced Micro Devices, SanDisk, and Western Digital. Early trading showed mixed sentiment: Palantir gained 2%, while Microsoft and Salesforce also rose. AMD slipped more than 2%, and SanDisk and Western Digital fell 1% and 5%, respectively. Micron Technology dropped 4% after a Reuters report that Chinese memory-chip maker CXMT is considering a second Beijing facility with government backing.
Healthcare stocks were also in focus following reports that Bristol Myers Squibb and AstraZeneca held preliminary merger talks. A deal could create one of the world's largest pharmaceutical companies, valued at nearly $400 billion. Bristol Myers shares climbed over 1%, while AstraZeneca fell more than 8%.
Elsewhere, Marriott International dropped 5% after issuing a weaker-than-expected third-quarter profit forecast, and Tyson Foods declined 4% after cutting its full-year outlook. The mixed corporate news underscores the importance of earnings season in shaping market direction, especially as investors weigh the sustainability of the AI-driven rally.
This article is for informational purposes only and does not constitute financial advice.
