U.S. equities ended the trading session in positive territory on Monday, as technology and semiconductor stocks rebounded sharply following last week's selloff. The Nasdaq Composite surged 1.27%, or 329.47 points, to close at 26,036.94, leading gains among the major indices. The S&P 500 advanced 47.67 points, or 0.63%, to 7,430.49, while the Dow Jones Industrial Average posted a modest gain of 6.62 points, or 0.01%, finishing at 50,871.37.
Semiconductor Sector Leads the Charge
The Philadelphia Semiconductor Index jumped 6.2%, recovering from Friday's sharp decline that saw the index drop significantly. Investors engaged in bargain hunting, snapping up shares of AI-related and chip companies that had been hit hard in the previous session. "A little bit of bargain hunting," said Rick Meckler, partner at Cherry Lane Investments, describing the buying activity.
Friday's selloff had been triggered by stronger-than-expected nonfarm payrolls data, which raised concerns about the Federal Reserve's monetary policy path. All three major indices tumbled, with the Nasdaq posting its heaviest daily percentage drop since April 2025. The S&P 500 also ended a nine-week winning streak on Friday.
Wall Street Analysts Divided on AI Outlook
Citigroup raised its year-end S&P 500 target to 8,100 from 7,700, citing strong earnings momentum and sustained demand for artificial intelligence. The bank expressed "high confidence" in further earnings surprises, describing the AI buildout as a "one-time capex supercycle" driven by capital spending on data centers, chips, and servers. However, Citi cautioned that growth prospects beyond 2027 remain uncertain.
In contrast, Goldman Sachs struck a more cautious tone. Following Friday's jobs report, Goldman now expects the Fed to hold rates steady through 2026 and delay any rate cuts until 2027. The bank also noted that a rate hike is now "slightly more plausible" than previously anticipated. Higher interest rates tend to pressure growth stocks, as future profits are discounted at a steeper rate.
Marvell Technology Joins S&P 500
Marvell Technology shares surged after S&P Dow Jones Indices announced that the company will join the S&P 500 index before the open on June 22. Marvell, along with larger competitor Broadcom, manufactures custom chips for cloud data centers, offering alternatives to Nvidia's expensive AI processors. Nvidia CEO Jensen Huang has previously called Marvell the next "trillion-dollar company."
Fed Rate Hike Expectations Rise
Traders have increased bets on a Fed rate hike, with fed funds futures pricing in a 70% probability of a rate increase by December, following Friday's employment data. Kevin Flanagan at WisdomTree noted that the Treasury front end has "priced in a rate hike," but added, "I don't think the Fed is there yet." Market attention now turns to Wednesday's Consumer Price Index release, with economists expecting core CPI to rise 0.3% in May from April and 2.9% year-over-year.
Consumer Sentiment Mixed
The New York Fed's May consumer survey provided mixed signals. Households now expect one-year inflation at 3.5%, down from 3.6%, while three-year and five-year inflation expectations remained unchanged at 3.1% and 3.0%, respectively. However, survey respondents indicated that credit conditions have tightened and job prospects have dimmed.
Market Risks Remain
Monday's bounce may prove to be temporary. Downside risks include another strong inflation print, rising oil prices, or renewed concerns about AI spending. The market has rebounded quickly in the past, but it remains reliant on a narrow and expensive trade. Wall Street largely dismissed Friday's chip selloff as a one-off scare, but the next session could be more challenging if economic data disappoints.
