U.S. stocks closed higher on Monday, with the S&P 500 and Nasdaq Composite edging closer to record levels, driven largely by a technology-led rally. The S&P 500 rose 0.43% to 7,612.53, while the Nasdaq gained 0.68% to 27,155.09. The Dow Jones Industrial Average also advanced, albeit more modestly, adding 0.11% to 51,089.09, according to data from LSEG.
The market's upward momentum was tempered by a sharp rise in oil prices, which injected a fresh dose of inflationary concern. Brent crude surged 4.25% to $94.99 per barrel, its highest level in weeks, as geopolitical tensions in the Middle East escalated. The jump in energy costs weighed on fuel-sensitive sectors, with United Airlines falling 2.1% and Alaska Air Group dropping 3.0%. The broader market rally remained narrow, as more stocks declined than advanced on the New York Stock Exchange, reflecting weak breadth.
Technology and energy were the only sectors in positive territory for the S&P 500, with utilities lagging behind. The tech sector was buoyed by Nvidia, which jumped approximately 5.9% after unveiling a new chip designed to bring artificial intelligence capabilities to personal computers. The chip, developed in collaboration with Microsoft, aims to handle tasks that previously required human-like cognitive processing. Microsoft shares rose 2.6% on the news. Nvidia CEO Jensen Huang described the partnership as an effort to "reinvent the PC" for the AI era.
Other semiconductor stocks showed mixed performance. Micron Technology climbed 6.1%, surpassing the $1,030 mark, while Qualcomm declined 8.7%. The divergence highlighted the selective nature of the current rally, with investors favoring companies directly tied to AI growth.
The rise in oil prices, driven by fears of supply disruptions from the Iran conflict, kept the broader market in check. Matthew Keator of the Keator Group noted that equities have been reacting directly to changes in the Middle East situation. Higher oil costs raise shipping and production expenses, which can push up bond yields and reduce the present value of future corporate profits. The 10-year Treasury yield stood at 4.469%.
Investors began the session on edge following reports of new U.S.-Iran headlines and rumors that Iran had halted talks with Washington. However, stocks recovered later in the day after President Donald Trump spoke and news of possible mediation emerged, causing oil and rates to pull back from earlier peaks, according to NYSE market strategist Eric Criscuolo.
Economic data also tempered enthusiasm. U.S. manufacturing activity expanded for the fifth consecutive month in May, according to Reuters, but the pace of growth was softer than expected, keeping investors cautious. The market now looks ahead to Broadcom's earnings report due Wednesday and Friday's jobs data for further signals on economic growth and AI demand.
Concerns about market concentration persist. Thomas Carroll, equity market strategist at Stifel, noted that the top 10 stocks now account for nearly half of the S&P 500's value, the highest proportion in four decades. He warned that if money rotates out of Big Tech, index funds could suffer, even if other stocks strengthen. "A breadth indicator I watch is signaling a rotation is coming," Carroll said.
Edward Jones senior global strategist Angelo Kourkafas summed up the market's central question: "The rally has been largely tech-led and supported by resilient earnings. But the key question is whether it can be sustained." As markets head into a data-heavy week, the answer remains uncertain.
