Wall Street rallies as AI optimism reignites, Treasury yields retreat

The S&P 500 and Nasdaq both closed significantly higher on Monday, driven by strong performances in Advanced Micro Devices and other AI-focused companies. Treasury yields dipped from recent peak levels, while crude oil prices plummeted to an 11-day low due to speculation of progress in Middle East talks during a UN meeting. Chip stocks saw a surge, with Intel and Arm Holdings both experiencing substantial gains.

Advanced Micro Devices achieved a market capitalization of $1 trillion for the first time ever. Investors noted signs of sustained expansion in AI spending, despite recent warnings from AI industry leaders that sparked a global tech sell-off last week. The benchmark 10-year US yield fell below the critical 5% threshold, while Brent crude futures dipped below $100 a barrel, settling at $100.34 per barrel later.

Market strategist Art Hogan from B. Riley Wealth stated that recent movements in oil prices and the US 10-year yield have shifted from being negative to positive for the market in the near term. Meta's shares skyrocketed after Wells Fargo increased its price target for the social media platform, following the launch of its Muse AI assistant.

The S&P 500 ended the day at 7,764.22 points, up 1.49%, while the Nasdaq Composite climbed to 27,122.09, up 2.26%. The Dow Jones Industrial Average increased by 371.24 points, or 0.72%, to 52,053.88. The S&P 500's valuation last Friday was at 19 times expected earnings, its lowest since 2023, according to LSEG data. AI-related heavyweights contributed significantly to the recent rise in earnings expectations.

Concerns over the interest-rate outlook persisted, as the Federal Reserve had raised rates for the first time in three years to curb inflation. Traders estimated a 50% chance of another rate hike next month, based on CME's FedWatch data. Reports suggested at least 10 central bank policymakers would provide commentary this week. Shares in companies with ties to Greenland surged after progress in diplomatic negotiations between the US and Denmark regarding Greenland's status.

Greenland Mines tripled in value, while Greenland Energy more than doubled. A Chinese-US summit on Thursday could discuss extending the trade truce between the two nations, the Iran conflict, and AI regulation. A report indicated the US proposed a six-month extension, while China sought a longer one. Bitcoin, an important indicator of risk appetite, surged to a seven-month high, boosting Coinbase and Strategy.

Paramount Skydance declined after Reuters reported the company had reached a settlement with California and 11 other states over a lawsuit attempting to block its $110 billion merger with Warner Bros Discovery.