US stocks ended mixed with an aggressive midday reversal in technology and semiconductor sectors offsetting an early morning rally. The Dow Jones Industrial Average rose $262.83, or 0.51%, to $52,210.08, supported by a rotation into defensive enterprise software stocks. In contrast, the tech-heavy Nasdaq Composite dropped $43.74, or 0.18%, to $24,932.08 due to a sharp sell-off in AI chipmakers, following earlier gains of 1%. The S&P 500 edged up $1.20, or 0.02%, to $7,413.18, hovering near flat.
The weakness in chipmakers weighed heavily on the broader market, as investors rotated out of semiconductor and AI-infrastructure stocks. The iShares Semiconductor ETF (SOXX) was down more than -3% at a 1-week low. Notable losers included Sandisk (SNDK) down over -11%, and Advanced Micro Devices (AMD) and Western Digital (WDC) both down more than -6%. Nvidia also tumbled 4.99%, and Micron Technology shed 2.25%. This selloff points to deepening concerns over crowded equity positioning and rising corporate debt levels as the AI buildout progresses, with worries over artificially inflated demand for AI after Nvidia's fresh round of deals worth more than $750 billion.
Conversely, software stocks saw significant gains. Workday (WDAY) was up more than +8%, leading gainers in the S&P 500 and Nasdaq 100. Atlassian (TEAM) climbed over +7%, while Autodesk (ADSK) and Oracle (ORCL) were up more than +5%. Salesforce (CRM) led gains in the Dow Jones Industrials, rising more than +4%. Adobe (ADBE) was up more than +4%, and ServiceNow (NOW), Palantir Technologies (PLTR), and Intuit (INTU) all rose more than +3%. Microsoft (MSFT) was up by more than +2%, and Datadog (DDOG) was up by more than +1%.
Contributing to early market gains, the US and Iran held off attacks for a third straight day, easing geopolitical risks and causing crude oil prices to plunge. West Texas Intermediate crude for September delivery fell $6.70, or 7.5%, to settle at $82.61 a barrel, and Brent crude dropped $8.42, or 8.7%, to close at $88.36 a barrel. This sustained pullback in oil prices is expected to ease near-term cost pressures ahead of the Federal Reserve's upcoming interest rate decision on Wednesday. Traders see a roughly one-in-three chance of a rate hike, with some analysts suggesting the Fed might surprise with a quarter-point increase to reinforce its credibility in battling inflation. Investors are also bracing for a busy week of corporate earnings, with roughly one-third of S&P 500 components scheduled to report, including mega-cap tech leaders like Microsoft, Meta Platforms, Apple, and Amazon.
