In early trading on Monday, Wall Street continued its upward momentum, with the Dow Jones Industrial Average advancing 0.9%. This comes after a weekend of de-escalation between the US and Iran, which has pushed crude oil prices lower.
Traders are now looking ahead to a busy week filled with high-impact events, including quarterly earnings from mega-cap technology companies and a Federal Reserve meeting that could hold surprises. The Dow rose by 467.59 points, or 0.90%, to 52,414.84. The Nasdaq Composite added 85.21 points, or 0.34%, to 25,061.03, while the S&P 500 climbed 30.11 points, or 0.41%, to 7,442.09.
The easing of tensions in the Middle East has led to a drop in oil prices. On Monday morning, Brent crude futures for September delivery fell 7.7% to around $89.41 per barrel. Meanwhile, US West Texas Intermediate crude futures dropped more than 6.3% to $83.21 per barrel. However, geopolitical instability elsewhere is escalating, as Ukraine attacked an Iranian merchant vessel in the Caspian Sea, prompting Tehran to accuse Kyiv of committing "hostile and criminal acts."
Major stock indices face numerous challenges in the week ahead. Amazon, Apple, Meta Platforms, and Microsoft are all set to release their quarterly results. Following Alphabet's disappointing earnings last week, these reports will either ease or intensify investor concerns about the frenzy of spending on artificial intelligence. The outcomes could directly impact semiconductor companies, which are major beneficiaries of the AI spending boom.
"The biggest risk is the continuation of spending," said Ken Mahoney, CEO of Mahoney Asset Management. "The issue is that if they do listen to shareholders and slightly trim or slow the growth of that spending, then the rest of the market won't like it either."
"So it's a bit of a seesaw effect," he added.
The Federal Reserve is scheduled to announce its latest interest rate decision on Wednesday. While markets widely expect the central bank to raise rates in September, pricing data from the CME FedWatch Tool suggests a significant probability of a 25-basis-point increase in the benchmark borrowing rate as early as this week.
US stocks have just emerged from another losing week, weighed down by a pullback in chip stocks and uncertainty surrounding the conflict with Iran. Last Friday, the S&P 500 and the Nasdaq each fell 0.6% and 2.1%, respectively, marking their second consecutive weekly decline. The Dow Jones dropped 0.4%, extending its losing streak to a third week.
On the economic data front, US durable goods orders rose 0.3% in June compared to the previous month, falling short of the 1.8% increase that had been forecast. The estimate range from 43 economists stretched from a decline of 0.7% to a gain of 5.7%. Excluding transportation, new orders increased 0.6% in June, down from a 1.8% rise in May. Excluding defense, new orders were up 0.3% in June, compared to a 4.3% decline in the prior month. Orders for non-defense capital goods excluding aircraft, a key measure of business investment, rose 0.9% in June, following a 1.9% increase in May. Shipments of these core capital goods increased 1.9% in June, up from a 0.2% gain in May.
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