Investors shook off the midterm elections, a brutal market selloff and even the shocking spy scandal that ensnared Nvidia's Jensen Huang to snap up shares of everything from chip makers and banks to jet engines.
The major stock indexes surged on Monday, retracing last week's wild swings to close just above where they stood a week ago -- when the election's votes weren't yet counted. The rally was both broad, with 423 of the S&P 500's stocks closing higher, and steep, as the benchmark index posted its best day in seven months.
And it dragged a $4.3 trillion anchor: Nvidia, the world's second-most valuable company, tumbled on news that its board is probing whether its famous CEO, Huang, revealed sensitive information to a suspected Chinese spy with whom he had an affair.
Whether they were "buying the dip" or simply having second thoughts on what the Democrats' sweep into power last week would mean for the economy and the AI build-out, investors began the new week with a different mindset. As they did during the aftermath of President Trump's trade war, a spate of corporate defaults and rising interest rates, they came back to the market in droves.
"It's almost become a meme," said Mark Hackett, chief market strategist at Nationwide. "The kind of universal belief that the `Democrats have won, so therefore the AI trade is over' on Thursday looks hyperbolic at best right now."
Analysts say that Monday's gains signal that investors are taking a more levelheaded approach to markets after individual investors and hedge funds alike were gripped by concerns that Democrats' victories in the U.S. midterms election would slam the brakes on the AI build-out.
The S&P 500 rose 2.3%. The Nasdaq composite added 2.7%, while the Dow Jones Industrial Average gained 2.2%, or 1104 points.
All 11 sectors of the S&P 500 closed higher Monday, the first time all have risen in tandem since May. Industrials led the charge with a 3.8% gain, aided by a sharp drop in oil prices. The price of Brent crude futures, the international benchmark for oil, fell 5.8% to $92.57 a barrel after President Trump played down the prospect of further U.S. attacks on Iran despite continuing risks to Middle Eastern oil supplies.
A solid jobs report Friday and strong earnings growth also lifted investors' spirits. The Russell 2000 index of smaller companies rose 3.1%, its best day since March. The Dow Jones Transportation Average, which tracks shares of companies with vital roles in moving goods and raw materials, also added 3.1%.
"Reality is just setting in -- that the underlying economy is robust," said Kieran Osborne, chief investment officer at Mission Wealth.
Shares of Nvidia fell 4.3% on Monday after its board announced the probe over the weekend. Nvidia was the worst-performing stock in the Dow and the second-worst in the S&P 500.
Analysts say that Monday's gains are also an encouraging sign that the market may continue to go up. Many were concerned the rally was too dependent on a handful of stocks tied to AI.
The recent selloff has also helped bring stock valuations down from historically expensive levels. Companies in the S&P 500 recently traded at about 17.7 times projected earnings over the next 12 months, the lowest ratio since November 2023, according to FactSet.
"The volatility that we faced post election is really an opportunity for patient investors," said Alex Guiliano, chief investment officer at Resonate Wealth Partners.
The Nasdaq composite has averaged a move of 2.1 percentage points over the last eight trading days, marking its biggest bout of volatility since April 2025 by one measure, according to Dow Jones Market Data.
Still, some analysts say they aren't letting their guard down just yet. Stuart Kaiser, head of equity trading strategy at Citi Global Markets, warned in a Sunday note that concerns around AI could continue driving risk and that "we still would not buy the dip."
Comments