Key Takeaways:
Dip buyers returned to Wall Street on Monday, driving a rebound in semiconductor stocks that UBS said may signal the end of a historic sell-off in momentum names.
S&P 500 futures rose 0.3% and Nasdaq 100 futures gained 0.6% as dip buyers scooped up chip shares after last week's rout pushed the group into a bear market.
"The sharp sell-off in momentum stocks may be near an end, creating an opportunity to re-establish AI and semiconductor positions," the UBS trading desk said in a note.
Micron Technology climbed more than 4% in pre-market trading, while Advanced Micro Devices and Marvell Technology each gained more than 2%. The rebound followed a brutal week that pushed chip stocks into a bear market, with Applied Materials sliding over 5% and KLA Corp. dropping more than 3% on Friday. UBS prime brokerage data showed hedge funds cut long positions in momentum and semiconductor stocks by approximately 5% of total market capitalization, one of the largest reductions on record.
The massive deleveraging reduces downside selling pressure and could pave the way for a sustained recovery in the tech sector, provided this week's earnings from Alphabet and Tesla deliver the catalyst bulls are waiting for.
The rebound extended across Asian markets, with Japan's Nikkei 225 surging 3.26% to 66,232.19, recovering part of its 6.4% plunge last week. The broader Topix climbed 2.44% to 4,014.95. China's Shanghai Composite added 0.85%, supported by state fund purchases, while Hong Kong's Alibaba rose more than 3% after unveiling its Qwen3.8 Max AI model.
Treasury Yields Edge Higher as Inflation Concerns Persist
The benchmark 10-year U.S. Treasury yield rose 2 basis points to 4.57%, reflecting lingering inflation worries. Cleveland Fed President Beth Hammack said Friday that persistently high inflation remains her bigger concern, as consumer spending stays resilient and unemployment remains low. Rate futures now price in an 85.6% chance of no change at the July Federal Open Market Committee meeting and a 14.4% chance of a 25-basis-point hike.
Oil prices edged lower as investors weighed reports of diplomatic efforts between the U.S. and Iran, with WTI crude erasing earlier gains. The retreat in energy costs provided some relief to equity markets after gasoline prices climbed back above $4 a gallon.
Earnings Season Heats Up
Second-quarter earnings season intensifies this week, with Alphabet and Tesla reporting alongside Intel, Texas Instruments, and IBM. S&P 500 companies are expected to post an average 24% jump in quarterly earnings compared with a year earlier, according to Bloomberg Intelligence. The results will test whether the AI trade can regain momentum after last week's sell-off.
This article is for informational purposes only and does not constitute investment advice.
