US stocks ended mixed on Monday as a sharp decline in semiconductor equities was counterbalanced by lower oil prices and gains in other sectors. The Dow Jones Industrial Average rose 262.83 points, or 0.51%, to 52,210.08, marking its third straight daily gain. The S&P 500 saw a slight increase of 1.2 points, or 0.02%, closing at 7,413.18. In contrast, the Nasdaq Composite Index fell 43.74 points, or 0.18%, to 24,932.08, largely due to weakness in technology shares.
Investor concerns about the sustainability and return on investment of aggressive capital expenditure within the AI ecosystem triggered a widespread retreat among chipmakers. Nvidia led the downturn, tumbling 4.99%. Other major semiconductor firms also experienced significant losses, with Advanced Micro Devices dropping over 5% and Teradyne falling more than 4%. Micron Technology shed 2.25%. This sell-off in chip stocks contributed to the Nasdaq's decline, as investors questioned whether the immense spending in AI would translate into proportional returns.
The pressure on technology stocks was partially offset by a substantial drop in oil prices. West Texas Intermediate crude for September delivery plunged $6.70, or 7.5%, to settle at $82.61 a barrel, while Brent crude for September delivery fell $8.42, or 8.7%, to close at $88.36 a barrel. This sustained pullback in oil prices is expected to alleviate near-term cost pressures, particularly ahead of the Federal Reserve's upcoming interest rate decision on Wednesday, where officials are widely anticipated to maintain current target rates. Seven of the 11 primary S&P 500 sectors closed in the green, with consumer staples leading the gainers at 1.58% and communication services rising 1.46%. Energy and utilities were the biggest laggards, falling 2.01% and 1.32%, respectively.
Wall Street is also bracing for a busy week of second-quarter corporate earnings reports, with approximately one-third of S&P 500 components scheduled to release financial disclosures. Investor attention will be keenly focused on capital expenditure guidance and AI monetization metrics from major technology leaders such as Microsoft, Meta Platforms, Apple, and Amazon. This comes after aggressive infrastructure spending updates from Alphabet and Tesla earlier in the month sparked a sharp sector drawdown. The CNN Business Fear & Greed Index remained in the "Fear" zone, at a reading of 40.1, down from 41.3 previously, reflecting lingering investor apprehension.
Analysts like Chris Larkin, head of trading and investing at E*TRADE from Morgan Stanley, noted that this week presents numerous potential surprises, with geopolitics and oil prices being significant wild cards. He also highlighted that a bullish response to strong earnings from the 'Magnificent Seven' is not guaranteed, especially if AI spending levels continue to raise concerns. Kyle Rodda, a senior analyst at Capital.com, emphasized that the "excess capital expenditure and spending by AI companies" is a critical theme currently weighing on market sentiment, with fears that this will erode returns.
