Wall Street’s three main benchmarks ended higher on Monday as investors returned to megacap growth stocks, allowing both the S&P 500 and Nasdaq Composite to recover from their worst weekly performance since April.
The Dow Jones Industrial Average also made a comeback, breaking a two-session skid after hitting an all-time closing high last Wednesday. Megacap stocks such as Alphabet, Meta Platforms, and Tesla surged between 2.2% and 5.1% after being major drags on the market last week. Nvidia also saw a 4.8% rise following news from Reuters that the artificial intelligence chip leader was developing a version of its new flagship AI chips for the China market, compliant with current U.S. export controls.
The Information Technology index climbed 2%, topping sectoral gainers and snapping a four-day losing streak. Jason Pride, chief of investment strategy & research at Glenmede, commented, “We think this move today probably has more to do with a rebound from the selling that occurred last week than anything else.”
Adding to market dynamics was the recent announcement by U.S. President Joe Biden of his withdrawal from the presidential race and his endorsement of Vice President Kamala Harris for the November election. This shift prompted investors to reevaluate their positions, with some analysts suggesting the markets could benefit from the increased likelihood of a divided government under the next administration. Online betting site PredictIt showed pricing for a Donald Trump victory slipping 4 cents to 60 cents, while Harris’s odds climbed 12 cents to 39 cents.
Stocks linked to Trump had mixed reactions; Trump Media & Technology Group dropped 0.8%, while software firm Phunware gained 4%. Investors are now focused on who will join Harris on the Democratic presidential ticket and how her platform might differ from Biden’s.
Amid these political changes, traders are also bracing for quarterly earnings reports, including from Alphabet and Tesla. These results will test whether the recent rally in high-momentum stocks is sustainable and if there will be a shift toward underperforming sectors.
“We’re seeing the market begin to price in a little bit a faster set of rate cuts, and that is leading to a bit of a shift in leadership to favor smaller-cap stocks and to deviate from the focus on the largest tech companies,” said Pride. “Obviously today looks a little bit different to that, but it’s still a trend in the background.”
By the close of trading, the S&P 500 had gained 59.41 points, or 1.08%, to reach 5,564.41 points. The Nasdaq Composite climbed 280.63 points, or 1.58%, to 18,007.57, and the Dow Jones Industrial Average rose 127.91 points, or 0.32%, to 40,415.44.
In other market movements, cybersecurity firm CrowdStrike slumped 13.5% due to a software update causing a global tech outage on Friday. Delta Air Lines dropped 3.5% after canceling over 600 flights as it struggled to restore operations post-outage. Verizon Communications fell 6.1% following a second-quarter revenue miss. In contrast, Mattel Inc jumped 15.1% after Reuters reported that buyout firm L Catterton had approached the toy maker with an acquisition offer.
Volume on U.S. exchanges was 10.95 billion shares, compared to the 11.37 billion average for the full session over the last 20 trading days.