The U.S. stock market ended Monday’s session firmly higher, with both the S&P 500 and Nasdaq posting strong gains as Broadcom and other semiconductor stocks rallied. Investors continued to buy shares of companies linked to artificial intelligence, expecting the sector to drive a strong second-quarter earnings season.

Broadcom Rallies After Deal Extension with Apple

Broadcom shares jumped 3.7% after the chipmaker and Apple agreed to extend their deal through 2031 to develop and supply a range of custom chips.

The move helped technology stocks attract fresh buying interest. The S&P 500 information technology sector index rose 1.3%, while the Philadelphia SE Semiconductor Index gained 2.2% after two consecutive sessions of losses.

The rally shows that investors still have strong expectations for chip and AI-related stocks. However, the concentration of market gains is also worth noting, as the broader market remains heavily dependent on a limited group of large technology names.

S&P 500 and Nasdaq End the Session Higher

At the close, the S&P 500 rose 0.72% to 7,537.43 points. The Nasdaq gained 1.12% to 26,121.16 points, while the Dow Jones Industrial Average advanced 0.29% to 53,055.91 points.

Although the S&P 500 finished higher, declining stocks within the index outnumbered advancing ones by a ratio of 1.3 to 1. This suggests that the rally has not yet broadened across the market and is still being led mainly by selected sectors.

Following Monday’s gains, the S&P 500 is now up about 10% in 2026, but it remains roughly 1% below its record closing high set on June 2.

Investors Have High Expectations for Earnings Season

Major U.S. companies are set to begin reporting quarterly results in the coming days. According to LSEG I/B/E/S data, S&P 500 companies are expected to post aggregate earnings growth of 24% year over year in the second quarter.

Technology sector earnings are projected to rise by around 65%, reflecting the market’s high expectations for the AI wave.

This week, Delta Air Lines and PepsiCo are among the notable companies scheduled to report results.

Microsoft Falls After Job Cut Announcement

In contrast to the rally in many technology stocks, Microsoft shares fell nearly 1% after the company said it would cut about 2.1% of its workforce, equivalent to roughly 4,800 jobs.

The announcement raised concerns about Microsoft’s heavy capital spending, especially as its AI investments still need more time to prove a clear return on invested capital.

Economic Data and Interest Rate Expectations

On the economic front, the Institute for Supply Management’s non-manufacturing purchasing managers index edged down to 54.0 last month, in line with expectations.

Following last week’s weaker-than-expected jobs report, traders now see a 25% chance that the Fed will raise interest rates by 25 basis points at its July 29 meeting, according to CME’s FedWatch tool.

Minutes from the Fed’s latest meeting are due on Wednesday. Meanwhile, Fed Governor Christopher Waller said forward guidance can be a useful tool when applied under the right circumstances, but it can also become problematic if used too rigidly.

Other Notable Market Moves

SpaceX slipped 1% despite more than $26 billion worth of its shares changing hands, most of which occurred in the final seconds of the session. Elon Musk’s rocket and AI company is expected to join the Nasdaq 100 on Tuesday.

Shares of O’Reilly Automotive tumbled 6.7% after Bloomberg News reported that the company had made a cash offer to buy Genuine Parts. Genuine Parts shares also fell about 3%.

Trading volume on U.S. exchanges was relatively light, with 16.8 billion shares changing hands, below the 20-session average of 23.4 billion shares.

Conclusion

The strong gains in the S&P 500 and Nasdaq once again highlight the appeal of AI and semiconductor stocks, especially after positive news from Broadcom. However, the rally remains selective, as declining stocks within the S&P 500 still outnumbered advancing ones.

Source: Reuters