Wall Street took a breather on Monday, with the S&P 500 hovering near unchanged and the Dow and Nasdaq edging lower after a streak of record highs. The pause came as oil prices climbed sharply, reigniting inflation concerns just as investors brace for a critical week of tech earnings and a Federal Reserve policy meeting.
Brent crude futures rose about 3% to $108.46 a barrel, driven by stalled U.S.-Iran nuclear negotiations and continued restrictions on shipments through the Strait of Hormuz. The geopolitical tension has injected fresh uncertainty into energy markets, with analysts warning that further upside in oil could complicate the Fed's path on interest rates.
In corporate news, Microsoft shares slipped after OpenAI terminated the company's exclusive access to its AI models and tools. The move could open the door for cloud partnerships with rivals like Amazon and Google, though Microsoft retains its role as OpenAI's primary cloud provider and holds an intellectual property license through 2032. D.A. Davidson analyst Gil Luria called the revised arrangement "essential" for OpenAI's enterprise ambitions.
Nvidia shares gained, reclaiming a market capitalization above $5 trillion, as investors rotated back into semiconductor leaders ahead of earnings from Alphabet, Amazon, and Meta later this week. The broader tech sector remains under the microscope, with market participants focused on whether the AI-driven rally can sustain momentum amid rising input costs.
Earnings season is heating up, with companies representing roughly 44% of the S&P 500's total market value set to report this week. Of the 139 firms that had reported as of Friday, 81.3% beat earnings estimates, according to LSEG data. However, James Reilly of Capital Economics noted that for this market, "the outlook for tech" is what truly matters, rather than the broader economy.
Verizon shares rose after the telecom giant lifted its annual profit outlook and posted an unexpected gain of 55,000 postpaid wireless subscribers in the first quarter—its first net increase for a March quarter in over a decade. New Street Research analysts said the results signal CEO Dan Schulman's willingness to "fight tooth and nail" for market share.
Domino's Pizza shares tumbled roughly 10% after the company issued a weak annual sales outlook. First-quarter U.S. comparable sales rose just 0.9%, well below the 2.72% increase analysts had expected, raising concerns about consumer spending pressures.
The Federal Reserve is widely expected to hold its benchmark overnight rate steady at 3.50%-3.75% when it concludes its two-day meeting on Wednesday. Investors will also parse first-quarter GDP data and the March personal consumption expenditures price index, the Fed's preferred inflation gauge. Phil Blancato, chief market strategist at Osaic Wealth, described the current environment as a "holding-on moment" for stocks, with traders awaiting fresh data to justify the year's gains.
Despite the headline index weakness, breadth was positive—more stocks rose than fell on both the NYSE and Nasdaq—suggesting the selling was localized and not a broad-based retreat. The key risk, analysts say, is that a further jump in oil prices could box the Fed in on rate cuts, while underwhelming tech earnings could stall the rally even if other sectors deliver upside surprises.
