Key facts
- Wall Street closed mixed on Monday.
- Major tech companies including Microsoft, Amazon, Meta, and Apple are set to report earnings this week.
- Crude oil prices fell to a one-week low after U.S. President Donald Trump indicated 'good talks' with Iran.
- The PHLX chip index is down approximately 20% from its record high.
- Traders anticipate a 62% chance the Federal Reserve will keep rates unchanged on Wednesday.
- The S&P 500 gained 0.02%, the Nasdaq Composite lost 0.16%, and the Dow Jones Industrial Average rose 0.49%.
Wall Street concluded Monday's trading session with mixed results, as investors closely monitored upcoming earnings reports from major technology firms and expressed concerns that elevated oil prices could compel the Federal Reserve to implement another interest rate hike. The S&P 500 saw a slight increase of 0.02%, while the Nasdaq Composite declined by 0.16%, and the Dow Jones Industrial Average advanced by 0.49%.
This week is pivotal for quarterly earnings, with technology giants such as Microsoft, Amazon, Meta, and Apple scheduled to release their results. Investors are scrutinizing whether the prolonged rally, largely driven by optimism surrounding artificial intelligence, is sustainable, particularly after recent earnings from Tesla and Alphabet revealed significant investments in AI.
Market sentiment was also influenced by a drop in crude oil prices, which reached a one-week low. This decline followed statements from U.S. President Donald Trump indicating 'good talks' with Iran and the possibility of a peace deal, though he cautioned that U.S. strikes would resume if negotiations faltered. Last week, oil prices had surged, with Brent futures exceeding $100 a barrel amid new strikes on shipping in the Middle East.
The PHLX chip index continued its recent downward trend, now down approximately 20% from its record high close on June 22, though it remains up about 63% for the year. The debut of Chinese chipmaker CXMT Corp and reports of China manufacturing homegrown DUV chipmaking tools signal increasing competition for the U.S. semiconductor industry.
Analysts anticipate that aggregate second-quarter earnings for the S&P 500 will increase by 39% year-over-year, with AI-related stocks contributing substantially to this growth. The S&P 500 is currently trading at approximately 20 times expected earnings, aligning with its 10-year average.
The Federal Reserve's monetary policy decision is due on Wednesday. According to the CME FedWatch tool, traders are projecting a 62% probability that the central bank will maintain current interest rates, with a 38% chance of a 25 basis-point increase. The upcoming Personal Consumption Expenditures Price Index data for June will be crucial in shaping future interest rate expectations.