Wall Street's major indexes kicked off the trading week on a mixed note, with the Dow Jones Industrial Average slipping 0.24% while the S&P 500 edged up 0.04% and the tech-heavy Nasdaq gained 0.19%.
Investors are balancing bullish sentiment toward artificial intelligence stocks against escalating geopolitical risks in the Middle East. SanDisk jumped 4.61% and Micron Technology climbed 3.76%, while L3Harris Technologies Inc fell 3.15% and Workday dropped 2.42%. Among the "Magnificent Seven," Amazon rose 0.80%, Nvidia advanced 0.79%, Apple gained 0.39%, and Alphabet added 0.20%, while Meta Platforms slipped 0.70%, Tesla declined 1.00%, and Microsoft lost 1.04%.
News that Anthropic generated more than $11.5 billion in second-quarter revenue, marking a massive year-over-year surge, provided a significant boost to chipmakers and other semiconductor names, helping lift the Nasdaq. Micron Technology advanced more than 3%, with Broadcom and Nvidia following suit.
However, oil prices ticked higher as a senior Iranian official told Reuters that Tehran would escalate tensions in the Strait of Hormuz and across the broader Middle East should diplomatic efforts with Washington fail. West Texas Intermediate crude futures rose nearly 1% to around $83 per barrel, while international benchmark Brent crude gained approximately 1% to about $89 per barrel. The 60-day memorandum of understanding between the United States and Iran expires on Monday, yet negotiations remain deadlocked.
"The U.S. is preparing another round of sanctions to try to force Iran back to the negotiating table, while Iran showed a more aggressive stance last week, meaning peace still seems far off in the short term," noted Ipek Ozkardeskaya, an analyst at Swissquote Bank. President Trump has urged Americans to accept higher gasoline prices as the conflict continues, and ongoing fighting between Israel and Hezbollah has dealt another setback to regional ceasefire efforts.
Despite the Middle East turmoil and lingering concerns about the AI trade, equities have continued to climb, supported by a stellar earnings season that pushed the S&P 500 to record highs last week. Retail sales data came in below expectations, and with inflation readings relatively tame, markets have scaled back expectations for a Fed rate hike next month.
"The shift in rate expectations is helping certain tech stocks. July earnings were strong overall, but the tech sector's performance 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, during a Monday appearance on a European morning finance program.
The economic calendar is relatively light this week, though the Federal Reserve will release the minutes from its latest meeting on Wednesday. Several major retailers are set to report earnings: Walmart will release results on Thursday, while Home Depot and Lowe's are scheduled for Tuesday and Wednesday, respectively. On the data front, investors will watch the August Empire State Manufacturing Index and the August NAHB Housing Market Index.
Goldman Sachs sees a "very small" chance of a September rate hike. In a client note, the firm's chief economist Jan Hatzius wrote that weak U.S. retail sales, disappointing employment data, and cooling inflation make a September hike highly unlikely. "Based on our baseline economic forecast, inflation news is more likely to improve further than deteriorate again over time. We still believe the market's pricing of the federal funds rate is too hawkish," Hatzius stated. Traders have now pushed back expectations for the next 25-basis-point hike to January, whereas a week ago they fully priced in a December move.
The AI bull market is entering its "delivery phase." Following a sharp rebound since August in semiconductor stocks and the broader AI infrastructure theme, market volatility has rapidly subsided. Wall Street's two financial giants, Morgan Stanley and JPMorgan, have recently published research notes in near-unison, arguing that the primary driver pushing the S&P 500 higher is shifting from valuation expansion to earnings upgrades and AI commercialization. JPMorgan last week raised its end-2026 target from 7,800 to 8,000 points and lifted its EPS trajectory for this year and next. Morgan Stanley had previously boosted its 2026 target to 8,000 points and its 12-month target to 8,300, explicitly stating the increase is driven by earnings rather than valuation. At least seven Wall Street institutions now expect the S&P 500 to reach 8,000 points by the end of 2026.