A rally in semiconductor stocks lifted the S&P 500 and NASDAQ to more than one-week highs on Monday as a positive update on trade led investor sentiment in a favorable direction, fueling gains across the major indices after a slight setback for the Dow Jones.
During Monday’s session, the Dow Jones fell by 25.57 points, or 0.06%, to 42,706.56. The S&P 500 was up by 32.91 points, or 0.55%, to reach 5,975.38, while the NASDAQ Composite went up 243.30 points, or 1.24%, to close at 19,864.98. Rise in tech stocks, especially semiconductor stocks, were said to drive gains in the major indices.
Seven of the 11 S&P 500 sectors declined on Monday, but communication services climbed 2.13%, and technology shares increased 1.44%. According to Michael Green, a portfolio manager at Simplify Asset Management, the rally was fueled by 401(k) retirement plan flows and large-cap stock concentration.
Also, chipmakers had surged as Microsoft unveiled an $80 billion investment in AI-driven data centers. Investor optimism was also lifted after Foxconn’s fourth-quarter revenue topped forecasts. Overall, the markets’ performance shows a continued trend from last year, as tech and semiconductor heavyweights shine through, fueled by optimism for long-term growth in AI and advanced data infrastructure development.
During the session on Monday, we witnessed huge gains in NVIDIA, Advanced Micro Devices, and Micron Technology. The former gained 3.43%, while the latter gained 3.33% and 10.45%, respectively. The Philadelphia Semiconductor Index jumped 2.84%. That was despite benchmark 10-year Treasury yields touching their highest levels since May.
The U.S. stock market had rallied sharply on Friday from losses incurred in December and early January. One major reason for the earlier retreats was high valuations, increasing Treasury yields, and thin liquidity; traders last retreated after the strong run at the end of 2024. The sector was resilient from optimism over progress in semiconductors and AI.
Automakers Ford and General Motors rose as the former gained 0.40% and the latter added 3.40%. After a report indicated President-elect Trump’s administration would slap selective tariffs on crucial sectors. However, later, Trump denied it, but that created a belief that the Trump tariff policies will be less extreme than initially perceived.
Mr. Brian Jacobsen, chief economist at Annex Wealth Management, noted that even though Trump restates his strong commitment to a strong tariff plan, the speculation surrounding his policies had already started to create hope among investors. This hope indicated that perhaps his policies would not be as harsh or extreme as many had feared them to be in the first place. This change in perception significantly strengthened investor sentiment and had a noticeable impact on market responses.
Automobile companies are most clearly exposed to the impact of the applied tariffs on trading partners of the United States in light of the broad and complex nature of their supply chains, which cut across nations, parts, and logistics.
Just a day ahead of President-elect Trump’s inauguration scheduled for January 20, a day when he is set to take over as the new leadership, investors are intensely combing through every piece of information or rumor related to his policies that he is likely to pursue shortly afterwards. They are likely to favor corporate America and boost the American economy in the future.
It is seen that the Citigroup stocks rose by 2.45% after the positive rating from Barclays. The bank index, SPXBK, was up 0.22%. Federal Reserve Vice Chairman for Supervision Michael Barr announced his resignation and is known as an advocate of strict regulations against large banks. This will be adding uncertainty regarding the future of the regulatory policies to the banking sector.
This week, investors are shifting their focus toward various economic data releases and significant speeches by officials of the U.S. Federal Reserve. They are actively seeking further insights to better understand the anticipated pace of monetary policy relaxation. Additionally, attention will be drawn to the much-awaited monthly payroll report, expected to provide key information about employment trends.
While the plans proposed by former President Trump are expected to boost corporate profits and stimulate overall economic growth, they also introduce inflation risks. Fed Governor Lisa Cook has been vocal in warning about persistent inflation concerns that continue to challenge the economic landscape.
On the NYSE, advancing issues declined slightly, with a 1.01-to-1 ratio, and by a 1.1-to-1 ratio on the NASDAQ. The S&P 500 recorded eight new 52-week highs and lows, while the NASDAQ Composite reported 97 new highs and 39 lows. Total trading volume reached 17.36 billion shares, surpassing the 12.37 billion-share average.
On Thursday, markets will remain closed in observance of a national day of mourning for former President Jimmy Carter.
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