Nasdaq reverses early rally as oil tops $89, AI jitters return

The Nasdaq Composite erased an early-session advance to close lower Monday, as Brent crude topped $89 a barrel and AI-chip stocks resumed their selloff, snapping a two-day winning streak for the tech-heavy index.

The Nasdaq Composite fell 0.1% to 25,508.07 after reversing a 0.8% intraday gain, as Brent crude rose 1.3% to $89.22 and AI-chip stocks extended recent declines.

The reversal reflected a market grappling with rising energy costs that threaten to keep inflation elevated and growing skepticism about whether AI spending will deliver the profits that justify current valuations, traders said.

The S&P 500 dipped 0.2% to 7,443.28, while the Dow Jones Industrial Average dropped 0.6% to 51,839.26. Energy was the lone bright spot among sectors, with ExxonMobil and Chevron gaining as oil prices climbed. Technology and consumer discretionary shares lagged, with Nvidia adding just 0.2% after Friday's drop and Advanced Micro Devices rising 1.6% on news of an expanded Microsoft partnership.

The moves come ahead of a packed earnings week that will test the AI thesis. Alphabet reports Wednesday, with investors focused on cloud revenue and capital spending plans. Tesla also reports Wednesday, while Intel follows Thursday. The results will offer the clearest signal yet on whether corporate AI spending is translating into bottom-line growth.

The 10-year Treasury yield climbed to 4.59% from 4.55% late Friday, extending a rise from 3.97% before the U.S.-Iran conflict escalated. The dollar index rose 0.17% to 100.91. Higher yields have pushed the average 30-year mortgage rate to its highest level in nearly a year, adding pressure on consumer-facing stocks.

Oil prices remained elevated after S&P Global counted only 127 vessels crossing the Strait of Hormuz during the week through Sunday, down nearly 50% from the prior week, as the U.S.-Iran conflict disrupted shipping through the critical chokepoint. Brent crude swung between roughly $86 and $91 before settling at $89.22.

Chip Stocks Lead Intraday Reversal

Semiconductor shares were at the center of the day's volatility. The Philadelphia Semiconductor Index opened higher but gave back gains as the session wore on, mirroring a pattern seen throughout July as investors rotated out of AI winners. South Korea's Kospi fell 4.5%, dragged lower by Samsung Electronics and SK Hynix, as foreign investors accelerated selling of memory-chip stocks.

Sandisk climbed 2.7% after tumbling 29% last week, while memory stocks broadly staged a partial recovery from Thursday's selloff. Still, the sector remains under pressure from concerns that AI-driven demand may not materialize as quickly as expected.

In contrast, Chinese tech stocks gained, with Hong Kong's Hang Seng Index rising 2.4% and the Shanghai Composite adding 0.9%, as domestic AI models narrowed the gap with U.S. leaders.

Earnings Season Heats Up

Beyond Big Tech, several companies posted notable moves. AMC Entertainment jumped 26.8% after reporting stronger-than-expected revenue for the latest quarter. Travelers Cos. surged 8% after catastrophe losses came in well below analyst estimates. Domino's Pizza rose 2.1% on better-than-expected spring revenue.

Warner Bros. Discovery fell 3.8% after a federal judge ordered it and Paramount to halt their $81 billion merger for at least two weeks.

This article is for informational purposes only and does not constitute investment advice.