On Monday, US stocks experienced a mixed trading day. The S&P 500 and Nasdaq Composite indices both fell, largely due to declines in megacap technology companies such as Alphabet, Meta, Amazon, and Microsoft. Alphabet alone tumbled 6.1%, while other major tech players saw drops between 2.3% and 4.3%. The S&P 500 communication services index, heavily weighted by Alphabet and Meta, consequently fell 4.4%. This tech sector weakness was attributed to concerns among investors regarding the substantial spending by hyperscalers who are raising funds for infrastructure expansion, particularly in AI.
SpaceX also contributed to the tech-led downturn, extending its losses for a third straight session with a nearly 10% decline. This occurred after its initial public offering and as the company launched its first-ever debt offering, aiming to raise at least $20 billion to fund its AI ambitions. Despite these tech sector struggles, the Dow Jones Industrial Average managed to record a slight gain, rising around 0.3% to 0.4%, benefiting from optimism surrounding progress in US-Iran negotiations.
Geopolitical developments played a significant role, with US and Iranian officials indicating encouraging progress in their first round of talks in Switzerland, including an agreement on a roadmap towards a final deal within 60 days. This progress, coupled with the US issuing a 60-day license for Iran to sell oil internationally, led to a decrease in oil prices by as much as 2%. However, bond yields climbed, with two-year notes reaching a 16-month high and the 10-year Treasury yield increasing to 4.51%, reflecting market expectations of a hawkish Federal Reserve and potential interest rate hikes later in the year, particularly ahead of Thursday's personal consumption expenditures (PCE) data release.
