U.S. equity markets presented a mixed picture on Monday, with the Dow Jones Industrial Average edging lower while the Nasdaq Composite managed a slight gain. The divergence reflected a tug-of-war between renewed enthusiasm for artificial intelligence stocks and heightened concerns over rising oil prices tied to geopolitical tensions in the Middle East.
The Dow slipped 111.70 points, or 0.22%, to close at 50,920.76, according to LSEG data. The S&P 500 held virtually unchanged at 7,580.01, while the Nasdaq Composite inched up 0.01% to 26,975.24. Trading volumes were moderate as investors weighed competing narratives.
AI Chip Race Heats Up
Nvidia provided a significant lift to the technology sector, with shares jumping 4.34% to $220.31. The chipmaker unveiled its new RTX Spark processor, developed in collaboration with Microsoft, designed to bring advanced AI capabilities to personal computers. Microsoft shares rose 2.44% to $461.21 as the partnership was well received by the market.
Nvidia CEO Jensen Huang described the three-year joint project with Microsoft as an effort to “reinvent the PC” for the AI era, according to Reuters. The move intensifies competition with Advanced Micro Devices, Intel, and Apple in the PC chip market. However, not all chipmakers benefited from the AI buzz. Qualcomm dropped nearly 7%, AMD fell 2.36%, and Intel lost 3.89%, as investors selectively picked winners rather than buying the sector broadly. Micron Technology, whose memory chips are used alongside AI processors, gained 5.99% to $1,029.18.
Analysts noted that Nvidia’s entry into the PC chip space could allow it to capture market share from rivals. Neil Shah of Counterpoint Research called the new chip a potential “RTX Spark moment” for personal computers.
Oil Surge Rattles Markets
Brent crude oil prices soared 6.11% to $96.69 per barrel, driven by escalating tensions with Iran. Reports from Iran’s Tasnim news agency indicated that Tehran has stopped message exchanges with the United States via mediators and set an agenda to potentially block the Strait of Hormuz, a critical chokepoint for global oil and LNG shipments. Iranian Foreign Minister Abbas Araqchi warned that the U.S. and Israel would bear responsibility if the ceasefire collapses.
The spike in energy prices revived concerns about inflationary pressures and the potential for further interest rate hikes. The U.S. 10-year Treasury yield edged up to 4.453% as traders recalibrated expectations. According to Reuters, markets now see nearly a 70% probability of a quarter-point rate hike by the Federal Reserve before year-end.
Sector and Stock Movers
Rising fuel costs weighed on travel and leisure stocks. United Airlines slid 4.61%, and Carnival Corporation dropped 3.37%. Conversely, energy stocks benefited from the oil rally, with Exxon Mobil climbing 2.78%. The United States Oil Fund, which tracks crude oil prices, surged 7.03%.
In deal news, Berkshire Hathaway agreed to acquire homebuilder Taylor Morrison Home for $6.8 billion in cash, marking its first major acquisition under CEO Greg Abel. Taylor Morrison shares soared 22.43%, while Berkshire Hathaway Class A shares slipped 0.55%.
Economic Data and Outlook
On the macro front, the Institute for Supply Management reported that U.S. manufacturing activity rose more than expected in May, with the manufacturing PMI climbing to 54.0 from 52.7 in April, the highest level since May 2022. Economists had forecast a reading of 53.0. While the report showed that factory input prices remained elevated, the pace of increases moderated, keeping the Federal Reserve in focus.
Investors are now looking ahead to Friday’s May payrolls report and Broadcom’s earnings, due Wednesday. Market breadth remained a concern, with declining stocks outpacing advancers on both the NYSE and Nasdaq early in the session. Stifel equity strategist Thomas Carroll noted that the ten largest stocks in the S&P 500 now account for nearly half of the index’s value, warning that a breadth indicator he monitors “is signaling a rotation is coming.”
Brian Jacobsen of Annex Wealth Management commented that “passing the baton from one chair to the next isn’t always a smooth process,” adding that a less-open Strait of Hormuz would likely push the Fed toward a more hawkish stance. Kathleen Brooks of XTB noted that any setback on a U.S.-Iran deal “could knock market sentiment.”
As markets continue to lean heavily on AI names to support indices, the interplay between oil prices, interest rates, and economic data remains a key risk factor. A stronger-than-expected jobs report, further crude advances, or a pullback in tech stocks could quickly test the current optimism.
