Investing.com — Wall Street on Monday ended mixed, giving up opening gains after semiconductor stocks took a hit on a media report that China had taken a key step forward in building a localized chip supply chain.
Stocks had earlier rallied at the open, helped by a slide in prices that brought immediate relief to inflation-weary markets at the start of a critical week dominated by a Federal Reserve rate decision and high-stakes mega-cap technology earnings.
The benchmark S&P 500 index closed little changed at 7,414.11 points, while the tech-heavy shed 0.2% to settle at 24,932.08 points. The blue-chip was holding on to gains, up 0.5% to conclude at 52,209.69 points.
All three indexes came off weekly losses, especially the Nasdaq which slid more than 2%. Sentiment took a beating from a widening conflict in the Middle East, concerns over heavy capital spending by major names such as and on artificial intelligence infrastructure, and a resurgence in trade tensions after the Trump administration imposed new tariffs.
After a strong open, the mood was dampened by a report from The Information which said China had started making domestically developed deep ultraviolet (DUV) lithography machines, a market dominated by Dutch semiconductor equipment giant .
Get premium Wall Street insights with analyst comments on InvestingPro — at 60% off now
Oil prices slump after about 20% gain in two weeks
Stock futures had rallied in premarket trading, after global crude prices cratered following a pause in tit-for-tat strikes between the U.S. and Iran.
The New York Times on Friday reported that President Donald Trump had halted plans to sharply escalate U.S. military operations in Iran after meeting with his top advisers and senior members of the administration, citing U.S. officials. The decision was driven by dwindling Pentagon stockpiles of air defenses.
The U.S. had hit Iran with strikes for 13 straight days, while Tehran had retaliated by targeting American military bases in neighboring countries. The fighting began after Iran attacked commercial ships in and around the Strait of Hormuz, leading to a collapse in an interim peace deal inked between the two sides in June. Supply disruption concerns were exacerbated after Iran-backed Houthis targeted Saudi tankers in another vital waterway, the Bab el-Mandeb Strait.
Against this backdrop, oil prices had jumped around 20% over a two-week span, with soaring 20.6% and WTI surging 19.2%.
“While the pause in strikes is certainly a welcome development, and investors are clearly incredibly attuned to any sign of good news from the region, there is still a lot of uncertainty hanging over markets – and it won’t take much for them to turn,” Yerbol Orynbayev, former World Bank governor of Kazakhstan, told Investing.com.
“Tensions in the Middle East remain on a knife’s edge, and without a meaningful framework to reduce tensions in the Strait of Hormuz, oil supply and inflation pressures could remain high. We have seen how oil prices can surge and plummet across short timeframes throughout this year – and the current slide to below $90 a barrel may not last,” he added.
The U.S. Ambassador to the United Nations, Mike Waltz, on Sunday told Fox News that talks with Iran were “ongoing” and were “happening at every level.”
“We’ve pretty much destroyed their military. They want to meet, and we’re meeting. We’ll see what happens. There’s a chance we could make a deal. Without what we did, they wouldn’t even be talking to us,” Trump told reporters on Monday.
“I have plenty of time…There’s a good chance that something could happen — and if it does, good. If it doesn’t, we go back to what we were doing two days ago,” the president added.
Big Tech earnings week
Turning away from the Middle East, market participants this week are looking ahead to a crucial slate of quarterly earnings from the Magnificent Seven mega-cap technology firm, including , , , and .
The sector enters the earnings gauntlet under intense scrutiny, with investors increasingly questioning towering valuations, massive capital expenditure budgets, and the group’s ability to deliver outsized top-line beats required to justify current multiples.
Concerns over booming artificial intelligence capex surged last week after earnings from Alphabet and Tesla spooked market participants.
Alphabet’s aggressive infrastructure spending upgrade and Tesla’s accelerating cash burn underscored fears that Silicon Valley’s relentless AI buildout is consuming cash faster than it can generate near-term revenues, compressing profit margins across the sector.
“The current week of earnings is the most significant one for the summer season, as over a third of the S&P 500 companies are due to report. Over the next few days, investors will be homing in on results from enormous AI capital expenditures, with shareholders looking for progress on the bottom line,” José Torres, senior economist at Interactive Brokers, said.
“Firms that deliver robust payouts amid strong returns are poised to be rewarded by market participants, while companies that post lackluster performance may be punished as Wall Street appears increasingly focused on separating the winners from the losers in the technological race,” he added.
On Monday, U.S.-listed shares of ASML fell 5.8% and so did other chip stocks, after The Information said a Shanghai-based, state-backed company had successfully started mass-producing homegrown immersion DUV lithography machines for the first time, marking a critical leap in Beijing’s push to build a localized chip supply chain and bypass Western technology.
Fed rate decision in focus
Away from earnings, the other major event of the week is the Fed’s rate decision and Chair Kevin Warsh’s press conference on Wednesday. While policymakers are widely expected to keep benchmark interest rates unchanged, investors will parse Warsh’s remarks for clues on the central bank’s inflation outlook and the future path of monetary policy.
“With U.S. inflation cooling to 3.5% in June, and this short-term reprieve in the Middle East, the case for rate hikes isn’t strong. It’s far more likely we’ll see rates remain unchanged; inflation remains high, the oil market continues to fluctuate, and the Strait of Hormuz’s reduced operational capacity is still a problem,” Orynbayev told Investing.com.
“We’ll wait to see which way the Fed chooses to go, but given the backdrop, one thing is for sure: investors will be hoping the Fed’s decision gives them more clarity and certainty over where the U.S.’s economy is headed,” he added.
This week’s economic calendar will also provide cues on monetary policy, as traders will receive second-quarter U.S. GDP figures and the June personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge.
Ayushman Ojha and Pranav Kashyap contributed to this article