S&P 500 gains 1% intraday as AI stocks lead rebound

The S&P 500 rose as much as 1% intraday on Monday before closing up 0.3% at 7,405.73, as a rebound in AI and semiconductor stocks countered mounting expectations for Fed rate hikes.

"Monday's bounce is a relief rally within a corrective phase, with the underlying breadth still deteriorating," said Kelvin Wong, market analyst at OANDA.

The Nasdaq Composite climbed 0.9% to 25,929.66, led by a surge in semiconductor names, while the Dow Jones Industrial Average slipped 0.2% to 50,786.01. Five of 11 S&P 500 sectors ended higher. Consumer Staples gained 1.7%, while Information Technology, Consumer Discretionary and Materials were among the laggards. The CBOE Volatility Index tumbled 12% to 18.92, and trading volume of 19.50 billion shares came in slightly below the 20-session average of 20.30 billion.

The rally faces an uphill battle. The S&P 500 remains capped below its 20-day moving average, and the NYSE Advance/Decline line has broken below key support, suggesting distribution rather than accumulation. With the 10-year Treasury yield climbing above 4.5% and the 30-year above 5%, the repricing of Fed rate hike expectations — now with more than 50% probability priced in by October 2026, according to CME FedWatch data — threatens to pressure valuations in the very AI and semiconductor names leading Monday's rebound.

AI Chip Rebound Masks Broader Weakness

Broadcom rose 2.8%, Advanced Micro Devices gained 5.1%, Marvell Technology jumped 9.6% and Micron Technology surged 9.9%, recouping much of Friday's losses. The catalyst: four major hyperscalers have raised their combined AI capital expenditure budget to $750 billion for 2026, with projections exceeding $1 trillion in 2027, according to Zacks Investment Research. Yet the narrow leadership — only five sectors in positive territory at the close — suggests the rally lacks the broad-based participation needed for a sustained advance.

Cross-Asset Pressure Builds

The 10-year U.S. Treasury yield held above 4.5% and the 30-year breached 5%, extending a climb that began after Friday's stronger-than-expected jobs report. West Texas Intermediate crude rose 0.8% to $91.30 a barrel, and Brent gained 1.3% to $94.25, as geopolitical tensions escalated after Iran's missile attack on Israel on June 7 and Israel's retaliatory strike on June 8. Higher energy costs compound the inflation challenge facing the Fed, reinforcing the case for tighter policy.

What's Next

The S&P 500's 2.6% decline last week — its worst since March 23 — snapped a nine-week winning streak. With the CME FedWatch tool now showing a greater than 50% probability of a rate hike by year-end, the market's next test comes with the release of May CPI data and the Fed's June policy decision. For now, the index's failure to reclaim its 20-day moving average keeps the near-term bias tilted to the downside.

This article is for informational purposes only and does not constitute investment advice.