NEW YORK — On Monday, technology stocks experienced an upswing, enabling U.S. stock indices to recover some ground lost during the holiday season that extended into the new year.
The S&P 500 posted a 0.6% gain for the second consecutive day, bouncing back after suffering five straight losses, marking its longest slump since April. Conversely, the Dow Jones Industrial Average saw a slight decline, down 25 points or 0.1%, while the Nasdaq composite surged by 1.2%.
Amidst a mixed trading environment within the S&P 500, slightly more stocks declined than advanced. Technology companies emerged as the primary gainers, particularly those involved in the ongoing excitement surrounding artificial intelligence (AI) advancements. Nvidia’s shares rose by 3.4%, surpassing its previous record set in November ahead of a keynote by CEO Jensen Huang scheduled for the annual CES convention in Las Vegas.
Despite increasing scrutiny about whether AI stocks are overvalued, the sector continues to express optimism about its future. On Friday, Microsoft Vice Chair Brad Smith disclosed that the company is poised to invest approximately $80 billion in AI-enabled data centers to develop AI models during the current fiscal year. He emphasized that AI represents the most significant opportunity for revitalizing the economy since the advent of electricity, prompting Microsoft’s shares to increase by 1.1%.
Uber Technologies’ stock surged by 2.7% after the ride-hailing service announced an acceleration of $1.5 billion in its stock buyback initiative, which is part of a broader $7 billion program previously detailed. Prashanth Mahendra-Rajah, Uber’s chief financial officer, stated the decision stemmed from the perception that the company’s stock is undervalued compared to its operational strengths.
In traditional industries, U.S. Steel’s shares jumped by 8.1% following the filing of a federal lawsuit in collaboration with Japan’s Nippon Steel against President Joe Biden’s recent decision to block a nearly $15 billion merger proposal. The lawsuit claims that the ruling was politically motivated and violated due process rights, while Japanese officials have argued there is little substantiation that the merger would pose a security threat to the U.S.
These gains provided cushion against further declines in the real estate sector, which has struggled in light of rising long-term interest rates. Real estate stocks in the S&P 500 experienced a 1.4% drop, marking the largest loss among the index’s 11 sectors.
Overall, the S&P 500 increased by 32.91 points, reaching 5,975.38. The Dow Jones Industrial Average fell by 25.57 points, ending at 42,706.56, while the Nasdaq composite rose significantly by 243.30 points, closing at 19,864.98.
This week is expected to feature one less trading day than usual, as both the New York Stock Exchange and Nasdaq will suspend trading on Thursday in honor of a National Day of Mourning for former President Jimmy Carter. However, the week is still filled with important market events. On Tuesday, updates will be released regarding monthly job openings from U.S. employers and the performance of the services sector. On Wednesday, the Federal Reserve will publish the minutes from its previous policy meeting, where it cut its main interest rate for the third consecutive time, while hinting at fewer reductions in 2025.
The highlight of the week will arrive on Friday with the release of the monthly jobs report, along with data reflecting consumer sentiment in the U.S.
Thus far, the economy has showcased considerable resilience, despite high interest rates imposed by the Fed in recent years to combat inflation. A report released on Monday indicated that an index measuring service sector activities reached its highest level in nearly three years.
“Activity in the expansive services industry surged in December due to fuller order books and increasing optimism about future prospects,” stated Chris Williamson, chief business economist at S&P Global Market Intelligence.
The Federal Reserve has been working to ease economic pressures and commenced interest rate cuts in September after inflation approached its 2% target. However, achieving the last crucial percentage point of inflation improvement is expected to be challenging. There are also rising concerns that upcoming tariffs and policies from President-elect Donald Trump could further increase inflationary pressures.
Consequently, there are apprehensions about interest rates remaining elevated longer than anticipated, leading to a rise in long-term Treasury yields within the bond market. Such trends may negatively affect stock prices, as higher-yielding bonds could attract investors who would generally consider equities instead.
According to Morgan Stanley strategist Michael Wilson, the optimal environment for U.S. stocks likely exists when the yield on the 10-year Treasury ranges between 4.00% and 4.50%. Currently, the yield has surpassed that threshold since mid-December, standing at 4.61%, a slight increase from 4.60% late on Friday.
In international markets, stock indices exhibited a mixed performance across Europe and Asia, with France’s CAC 40 climbing by 2.2%, while Japan’s Nikkei 225 fell by 1.5%.