Just three days ago, Wall Street was bleeding red. Investors rushed to sell stocks, bonds, bitcoin and even gold after a strong US jobs report created fears that the Federal Reserve could keep interest rates higher for longer. Technology stocks were hit the hardest, with concerns over high valuations and weaker-than-expected results from chipmaker Broadcom adding to the pressure.
The Nasdaq Composite plunged 4.18% on Friday, its worst one-day drop since April 2025, wiping out billions of dollars in market value and raising questions about whether the market’s strong rally was losing steam. But by Monday morning, the mood had changed completely. At 11:22 a.m. ET, the Nasdaq surged 457.66 points, or 1.78%, to 26,167.09. The S&P 500 gained 79.37 points, or 1.07%, to 7,463.11, while the Dow Jones Industrial Average rose 183.48 points, or 0.36%, to 51,050.26.
AI bulls rush back into the market
One of the biggest reasons behind Monday’s rebound was renewed confidence in artificial intelligence stocks. After Friday’s selloff, investors stepped back into the market, encouraged by Nvidia CEO Jensen Huang’s comments that the pullback was a buying opportunity rather than a reason to worry. Chip stocks moved higher, lifting the technology sector and helping the Nasdaq outperform the other major indices.
Middle East tensions fail to derail sentiment
Markets also got some relief as fears of a conflict in the Middle East eased. Over the weekend, Iran launched strikes that raised concerns about the stability of the ceasefire between Washington and Tehran. Israel responded with what the IDF described as a “large-scale strike on strategic defense systems.”
However, sentiment improved after President Donald Trump said Israel and Iran were “looking to do an immediate ceasefire” and that negotiations were continuing. Iran later said its military operations against Israel had ended, although it warned that attacks could resume if Israel continued military action in Lebanon.
Oil retreats from highs
The conflict initially pushed oil prices sharply higher, with Brent crude briefly climbing above $98 a barrel overnight. However, as tensions appeared to ease, prices pulled back. Brent crude was last trading around $94.25 a barrel, while US benchmark West Texas Intermediate was near $91 a barrel. The decline mattered because higher oil prices can increase inflation. If inflation rises, the Federal Reserve may have less room to lower interest rates. Lower oil prices therefore helped calm investor concerns and supported stocks.
Lower Treasury yields provide support
Stocks also got support from a slight drop in Treasury yields. The yield on the benchmark 10-year US Treasury note fell to 4.51% from 4.55% on Friday. Lower yields are generally positive for technology and growth stocks because they make future earnings more attractive to investors.
Still, inflation concerns have not disappeared. “The stock market may be becoming a victim of its own success,” said Callie Cox, chief market strategist at Ritholtz Wealth Management, told CNBC. “The job market has turned around, yet the threat of persistently high inflation seems to be the risk looming on everyone’s minds.”
“Growth and momentum have outpaced almost everything since the March lows,” she added. “That’s not what you’d expect in a high-rate, high-inflation environment, and these strategies may be vulnerable to disappointment if cost pressures stay elevated.”
Inflation data due on Wednesday
Investors are now waiting for Wednesday’s US consumer inflation report. The data could provide fresh clues on whether rising energy prices are starting to push inflation higher and how that might influence the Federal Reserve’s next interest-rate decision.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.