Stocks Settle Mixed as AI Angst Offsets Easing Geopolitical Tensions

The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.02%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.32%.  September E-mini S&P futures (ESU26) rose +0.02%, and September E-mini Nasdaq futures (NQU26) fell -0.33%.

Stock indexes settled mixed on Monday, with the Dow Jones Industrial Average posting a 1-week high and the Nasdaq 100 falling to a 2.5-month low. The weakness in chipmakers and AI-infrastructure stocks on Monday weighed on the Nasdaq 100 and limited gains in the broader market.  Investors rotated out of semiconductor and AI-infrastructure stocks on Monday and into beaten-down sectors, such as software.

Stocks initially jumped on Monday after the US and Iran held off on attacks for a third straight day, easing geopolitical risks, pushing crude oil prices sharply lower, and helping lift global stock and bond markets.  On Sunday, Mike Waltz, US ambassador to the United Nations, said the US is giving diplomacy “some space.”  The plunge in crude oil prices on Monday knocked the 10-year T-note yield down -4 bp to 4.64%.

Monday’s US economic news showed strength in the economy and is supportive of stocks after US Jun capital goods new orders nondefense ex-aircraft, a proxy for capital spending, rose +0.9% m/m, stronger than expectations of +0.7% m/m.

Sep WTI crude oil prices (CLU26) plunged by more than -7% on Monday as tensions eased in the Middle East after the US held off against further airstrikes on Iran for a third straight day and Iran signaled it was refraining from any retaliation as it held negotiations with Oman over the Strait of Hormuz. 

However, tensions remain high in the Middle East as the US maintains its blockade of Iranian oil shipments in the Persian Gulf and President Trump raised the possibility of intensified action against Iran.  Also, Houthi militants in Yemen claimed to have struck facilities linked to Saudi Aramco in the Red Sea port towns of Jizan and Yanbu on Saturday.  Yanbu, the western end of the East-West pipeline, has become Saudi’s key crude export outlet since the Strait of Hormuz has effectively been shut off by the war. Jizan is home to a refinery and export terminal along the Red Sea.

The outlook for strong Q2 earnings, which continue this week, is a bullish factor for stocks.  The markets are waiting for results from a raft of megacap technology companies this week, including Amazon.com, Meta Platforms, and Microsoft.  Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%, which was more than double the +12% analysts had expected.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 86% of the 135 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 38% chance of a +25 bp rate hike at the next FOMC meeting on Tue/Wed.

Overseas stock markets settled higher on Monday.  The Euro Stoxx 50 climbed to a 2.5-week high and closed up +0.02%.  China's Shanghai Composite closed up +1.15% on Friday.  Japan's Nikkei-225 Stock Average closed up +0.50%.

Interest Rates

September 10-year T-notes (ZNU6) on Monday closed up +8 ticks.  The 10-year T-note yield fell -3.6 bp to 4.641%.  T-notes moved higher amid Monday’s -7% plunge in crude oil prices, which eased inflation expectations.  The 10-year breakeven inflation rate fell to a 1-month low of 2.201% on Monday.  Weak demand for the Treasury’s $70 billion auction of 5-year T-notes limited gains in T-notes as the auction had a bid-to-cover ratio of 2.28, below the 10-auction average of 2.35 and the lowest in 3.75 years. 

European government bond yields moved lower on Monday.  The 10-year German bund yield fell -3.9 bp to 3.133%.  The 10-year UK gilt yield fell -3.5 bp to 4.997%.

The German Jul IFO business confidence index rose +0.9 to a 5-month high of 86.6, stronger than expectations of 86.0.

ECB Governing Council member Peter Kazimir said "he remains of the view that the ECB will have to raise interest rates at least one more time" to ensure that inflation risks don't spin out of control.

The markets are discounting an 88% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Chipmakers and AI-infrastructure stocks retreated on Monday, weighing on the broader market.  The iShares Semiconductor ETF (SOXX) fell to a 1-week low and closed down more than -2%.  Sandisk (SNDK) closed down more than -12% to lead losers in the S&P 500 and Nasdaq 100, and Advanced Micro Devices (AMD) and ASML Holding NV (ASML) closed down more than -5%. Also, Western Digital (WDC), Lam Research (LRCX), and Seagate Technology Holdings Plc (STX) closed down more than -4%, and Micron Technology (MU), Applied Materials (AMAT), and KLA Corp (KLAC) closed down more than -3%.  In addition, Marvell Technology (MRVL) closed down more than -2%.

Energy producers and service providers moved lower on Monday amid the -7% decline in crude oil prices. Devon Energy (DVN), Diamondback Energy (FANG), and Occidental Petroleum (OXY) closed down more than -4%, and APA Corp (APA), ConocoPhillips (COP), and Haliburton (HAL) closed down more than -3%.  Also, Chevron (CVX) closed down more than -2%, and ExxonMobil Holdings (XOM) and SLB Ltd (SLB) closed down more than -1%. 

Software stocks rallied on Monday, a supportive factor for the overall market.  Atlassian (TEAM) closed up more than +10%, and Workday (WDAY) closed up more than +9% to lead gainers in the S&P 500.  Also, Thomson Reuters (TRI) closed up more than +8%, and Autodesk (ADSK) and Palantir Technologies (PLTR) closed up more than +7%.  In addition, ServiceNow (NOW) closed up more than +6%, and Salesforce (CRM) closed up more than +6% to lead gainers in the Dow Jones Industrials.  Finally, Adobe (ADBE) closed up more than +5%, Oracle (ORCL) closed up more than +4%, Intuit (INTU) and Datadog (DDOG) closed up by more than +2%, and Microsoft (MSFT) closed up by more than +1%. 

Airline stocks and cruise line operators moved higher on Monday after crude oil prices plunged more than -7%. American Airlines Group (AAL), Carnival (CCL), Norwegian Cruise Line Holdings (NCLH), and Royal Caribbean Cruises (RCL) closed up more than +3%, and Alaska Air Group (ALK) closed up more than +2%.  Also, United Airlines Holdings (UAL) and Delta Air Lines (DAL) closed up more than +1%, and Southwest Airlines (LUV) closed up +0.67%. 

CH Robinson Worldwide (CHRW) closed down more than -6%, adding to last Friday’s -9% plunge, to lead trucking and freight companies lower after a Dallas jury awarded $604 million in compensatory damages against the company and two other defendants for a verdict related to a trucking accident.  Also, FedEx Freight Holding Company (FDXF) and Marten Transport (MRTN) closed down more than -4%, and Arcbest (ARCB) closed down more than -3%.  In addition, Old Dominion Freight Line (ODFL), Knight-Swift Transportation (KNX), JB Hunt Transport (JBHT), and XPO Inc (XPO) closed down more than -2%. 

MapLight Therapeutics (MPLT) closed down more than -71% after posting results from a mid-stage trial of its experimental therapy to treat schizophrenia, which Stifel said did not meet the “upside case” scenario.

Nvidia (NVDA) closed down more than -4% to lead losers in the Dow Jones Industrials after announcing it had made a “substantial” investment in AI startup Safe Superintelligence. 

Forte Biosciences (FBRX) closed up more than +39% after Argenx SE agreed to buy the company for about $2.2 billion, or $77 a share.   

D-Wave Quantum (QBTS) closed up more than +20% after Benchmark Company LLC reinstated coverage on the stock with a recommendation of buy and a price target of $30.

IonQ (IONQ) closed up more than +9% after Benchmark Company LLC reinstated coverage on the stock with a recommendation of buy and a price target of $60.

Baker Hughes (BKR) closed up more than +6% after reporting Q2 revenue of $6.74 billion, better than the consensus of $6.51 billion. 

Rocket Lab Corp. (RKLB) closed up more than +4% after KGI Securities upgraded the stock to outperform from neutral with a price target of $107.

Earnings Reports (7/28/2026)

American Tower Corp (AMT), Arch Capital Group Ltd (ACGL), Armstrong World Industries Inc (AWI), Avis Budget Group Inc (CAR), Axalta Coating Systems Ltd (AXTA), Axis Capital Holdings Ltd (AXS), Bloom Energy Corp (BE), Boeing Co/The (BA), BXP Inc (BXP), Caesars Entertainment Inc (CZR), Carrier Global Corp (CARR), Centene Corp (CNC), CenterPoint Energy Inc (CNP), Chemed Corp (CHE), CMS Energy Corp (CMS), Coca-Cola Co/The (KO), Corning Inc (GLW), CoStar Group Inc (CSGP), Crane Co (CR), DTE Energy Co (DTE), Ecolab Inc (ECL), Enphase Energy Inc (ENPH), ExlService Holdings Inc (EXLS), Expand Energy Corp (EXE), Extra Space Storage Inc (EXR), FirstEnergy Corp (FE), Ford Motor Co (F), HF Sinclair Corp (DINO), Hilton Worldwide Holdings Inc (HLT), Hubbell Inc (HUBB), Illinois Tool Works Inc (ITW), Incyte Corp (INCY), Invesco Ltd (IVZ), IQVIA Holdings Inc (IQV), KLA Corp (KLAC), Landstar System Inc (LSTR), Liberty Live Holdings Inc (LLYVA), Manhattan Associates Inc (MANH), Mondelez International Inc (MDLZ), NOV Inc (NOV), NXP Semiconductors NV (NXPI), Omnicom Group Inc (OMC), Oshkosh Corp (OSK), PACCAR Inc (PCAR), PayPal Holdings Inc (PYPL), Pentair PLC (PNR), PPG Industries Inc (PPG), Qorvo Inc (QRVO), Repligen Corp (RGEN), Rithm Capital Corp (RITM), Royal Caribbean Cruises Ltd (RCL), S&P Global Inc (SPGI), Seagate Technology Holdings PL (STX), Sherwin-Williams Co/The (SHW), Skyworks Solutions Inc (SWKS), STAG Industrial Inc (STAG), Teradyne Inc (TER), Textron Inc (TXT), TransUnion (TRU), United Parcel Service Inc (UPS), Unum Group (UNM), Veralto Corp (VLTO), Visa Inc (V), WP Carey Inc (WPC), Xylem Inc/NY (XYL).