S&P 500 and Other Indices Close Higher Amid Chip Stock Rally

The S&P 500 Index ($SPX) closed up +0.41% on Monday, while the Dow Jones Industrials Index ($DOWI) rose +0.08%. The Nasdaq 100 Index ($IUXX) increased by +0.71%. June E-mini S&P futures (ESM25) gained +0.60%, and June E-mini Nasdaq futures (NQM25) rose +0.80%.

Stock indexes recovered from early losses to finish higher due to strength in chip stocks. Energy producers also rallied as WTI crude oil prices increased more than +2% to a 1.5-week high. Additionally, U.S. steel and aluminum producers surged after President Trump announced plans to raise tariffs on imports to 50% from 25%.

Initially, stocks declined following increased trade tensions between the U.S. and China. China’s Ministry of Commerce accused the U.S. of imposing new discriminatory restrictions, including AI chip export controls and revoking Chinese student visas. This situation could further strain trade relations, despite President Trump expressing hope for a dialogue with President Xi Jinping this week to forge a trade truce.

Economic news also weighed on stocks, as the U.S. manufacturing activity unexpectedly contracted last month, and construction spending fell in April. Higher bond yields added bearish sentiment; the 10-year Treasury note yield rose +6 basis points to 4.46% as the trade tensions prompted a broad selloff of dollar assets.

The U.S. May ISM manufacturing index fell -0.2 to 48.5, contrary to expectations for an increase to 49.5. April construction spending declined -0.4% month-over-month, falling short of the anticipated +0.2% rise.

Comments from the Federal Reserve were generally supportive. Fed Governor Waller indicated he would support rate cuts later this year if inflation trends towards the 2% target and the labor market remains strong. Chicago Fed President Goolsbee noted that the Fed could move forward with rate cuts if trade policy uncertainties are resolved. In contrast, Dallas Fed President Logan mentioned that the Fed could afford to wait before changing interest rates, as both sides of its dual mandate appear balanced.

Market expectations currently assign a 5% chance for a -25 basis point rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on June 17-18.

This week, market focus shifts to new trade or tariff developments. Key reports include expected drops in April factory orders (-3.2% m/m) and JOLTS job openings (-92,000 to 7.1 million) due on Tuesday. On Wednesday, a +110,000 increase in May ADP employment and a rise in the ISM services index to 52.1 are anticipated. Thursday’s initial unemployment claims are expected to decline by -5,000 to 235,000. Finally, Friday’s employment report expects an increase of +125,000 nonfarm payrolls and an unchanged unemployment rate of 4.2%, with average hourly earnings projected to rise +0.3% m/m and +3.7% y/y.

Overseas markets closed lower on Monday. The Euro Stoxx 50 fell -0.21% to a one-week low. China’s Shanghai Composite was closed for the Dragon Boat Day holiday, and Japan’s Nikkei 225 dropped -1.30%.

Interest Rates

September 10-year Treasury notes (ZNU25) fell -9 ticks on Monday. The 10-year T-note yield climbed +6.2 basis points to 4.462%, driven by heightened trade tensions leading to a broad selloff in dollar assets, including Treasuries. A negative carryover from weakness in European government bonds also pressured T-notes.

Despite these losses, dovish Fed comments supported T-notes. Governor Waller’s statements hinted at potential rate cuts later this year, while Goolsbee noted the possibility of cuts if trade uncertainties diminish. Weaker-than-expected ISM and construction spending reports also benefitted T-notes.

European government bond yields rose, with the 10-year German bund yield increasing +2.4 basis points to 2.524% and the 10-year UK gilt yield climbing +2.1 basis points to 4.667%. The German May S&P manufacturing PMI was revised down to 48.3 from 48.8, while the UK PMI was adjusted up to 46.4 from 45.1. Swaps are pricing in a 98% chance for a -25 basis point rate cut by the ECB at Thursday’s policy meeting.

U.S. Stock Movers

Chip stocks performed well on Monday, with Micron Technology (MU) closing up more than +4%. Advanced Micro Devices (AMD) and Microchip Technology (MCHP) were up more than +3%. Other gainers included Broadcom (AVGO) and Marvel Technology (MRVL), which rose more than +2%. Nvidia (NVDA), Lam Research (LRCX), ARM Holdings Plc (ARM), and ASML Holding NV (ASML) also increased by over +1%.

Steel and aluminum producers soared following Trump’s tariff announcement. Cleveland-Cliffs (CLF) and Century Aluminum (CENX) jumped over +20%, while Steel Dynamics (STLD), Nucor (NUE), and Commercial Metals (CMC) rose by more than +10%.

Energy sector stocks gained as WTI crude prices jumped over +2%. Devon Energy (DVN), Diamondback Energy (FANG), and Haliburton (HAL) closed up more than +2%, with additional gains for APA Corp (APA), ConocoPhillips (COP), Hess Corp (HES), and Occidental Petroleum (OXY) of more than +1%.

Gold mining shares rose after gold prices soared more than +2% to a three-week high. Gold Fields Ltd (GFI) rallied over +9%, while Anglogold Ashanti Plc (AU) and Newmont (NEM) also recorded gains exceeding +7% and +5%, respectively. Zscaler (ZS) led Nasdaq 100 gainers with over a +6% increase following a price target raise from UBS.