US stocks closed with a mixed performance on Monday, with the Dow Jones Industrial Average falling 0.51%, while the S&P 500 edged up 0.52% and the Nasdaq Composite gained 0.32%. Investors are simultaneously embracing the artificial intelligence sector while weighing the risks of escalating Middle East tensions.
Among notable movers, SanDisk surged 8.88% and Micron Technology jumped 4.13%, while L3 Harris Technologies Inc dropped 4.64% and Workday declined 3.77%. In the "Magnificent Seven" group, Amazon rose 0.51%, Nvidia slipped 0.07%, Apple fell 0.11%, Alphabet declined 0.61%, Meta Platforms tumbled 3.54%, Tesla lost 0.87%, and Microsoft dropped 3.04%.
Anthropic's second-quarter revenue exceeded $11.5 billion, marking a massive year-over-year surge, and this news lifted Micron Technology and other chip stocks, helping to push the Nasdaq higher. Micron Technology opened with gains exceeding 3%.
Oil prices edged up slightly. A senior Iranian official told Reuters that if diplomatic mediation with the US fails, Iran will escalate tensions in the Strait of Hormuz and across the broader Middle East region. International oil prices rose on Monday. At the close, light sweet crude for September delivery on the New York Mercantile Exchange rose $2.10 to settle at $84.50 per barrel, a gain of 2.55%. Brent crude for October delivery on the London ICE Futures Exchange rose $2.35 to settle at $90.87 per barrel, an increase of 2.65%.
The 60-day memorandum of understanding between the US and Iran is set to expire on Monday, yet negotiations remain stalled. Ipek Ozkardeskaya, an analyst at Swissquote Bank, noted, "The US is preparing a new round of sanctions to try to force Iran back to the negotiating table, while Iran displayed a more aggressive stance last week, which means peace still seems far away in the short term."
Former President Donald Trump has called on Americans to accept higher gasoline prices while the conflict continues. The ongoing fighting between Israel and Iran-backed Hezbollah has further dealt a blow to regional ceasefire efforts.
Buoyed by a stellar earnings season, the S&P 500 hit a record high last week, boosting market confidence. Despite the ongoing Middle East conflict and concerns over AI trades, equities have continued to climb.
Retail sales data came in weaker than expected, and with inflation readings relatively tame, markets have scaled back expectations for a Federal Reserve rate hike next month. "The shift in rate expectations is favoring some tech stocks. July earnings were broadly strong, but the tech sector was lackluster; the recent sharp rebound in tech can be partly explained by changing rate expectations," said Rory McPherson, chief market strategist at Wren Sterling, in a Monday appearance on European Financial Morning.
This week's market catalysts are relatively sparse, though the Fed will release the minutes from its latest meeting on Wednesday. Several retailers are set to report earnings: Walmart will disclose results on Thursday, while Home Depot and Lowe's are scheduled to report on Tuesday and Wednesday, respectively. On the economic data front, markets will watch the August New York Fed manufacturing index and the August National Association of Home Builders housing market index.
Goldman Sachs sees a "very small" chance of a September rate hike. In a client note, Goldman Sachs chief economist Jan Hatzius wrote that given weak US retail sales data, disappointing employment figures, and cooling inflation, the likelihood of a Fed rate hike at the September meeting is "very small." Hatzius added, "Based on our baseline economic forecast, inflation news is more likely to improve further over time rather than deteriorate again. We still believe the market's pricing of the federal funds rate is too hawkish."
Data shows that traders have now pushed back expectations for the next 25-basis-point rate hike to January of next year, whereas a week ago they fully expected a hike in December.
The AI bull market has entered an "era of delivery." Morgan Stanley and JPMorgan are both eyeing the S&P 500 at 8,000 points. Following the sharp rebound in tech stocks since August, driven by semiconductor and broader AI computing infrastructure themes, the recent volatility in global equity markets is rapidly subsiding. The two Wall Street giants—Morgan Stanley and JPMorgan—have recently released research reports in unison, stating that the primary driver pushing the S&P 500 higher is shifting from valuation expansion to earnings upgrades and AI commercialization delivery.
Last week, JPMorgan raised its end-2026 target from 7,800 to 8,000 points and upgraded its EPS trajectory for this year and next. Morgan Stanley also raised its 2026 target to 8,000 points and its 12-month target to 8,300 points, explicitly stating that the upgrade is driven by earnings rather than valuation. At least seven Wall Street institutions now project the S&P 500 to reach 8,000 points by the end of 2026.
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