Dow tops 53,000 as S&P 500, Nasdaq gain on AI chip rally

The Dow Jones Industrial Average briefly climbed above the 53,000 mark for the first time on Monday, while the S&P 500 and Nasdaq Composite closed sharply higher as renewed buying in semiconductor stocks lifted broader technology shares ahead of the second-quarter earnings season.

The S&P 500 gained 0.7%, while the Nasdaq Composite advanced 1.1%. The Dow added 155 points, or 0.3%, after earlier reaching the milestone level during the session.

Investor sentiment improved after Broadcom and Apple announced an extension of their custom chip partnership through 2031, helping revive interest in artificial intelligence-related semiconductor stocks following two consecutive sessions of losses.

Chip stocks lead technology rebound

Broadcom shares jumped after the semiconductor company and Apple agreed to extend their long-term partnership to develop and supply custom chips through 2031.

The announcement helped lift the S&P 500 Information Technology sector, while the Philadelphia Semiconductor Index rebounded after two straight losing sessions.

Technology stocks broadly outperformed.

The Technology Select Sector SPDR ETF gained 2%, led by a 7% rise in Western Digital. Teradyne climbed about 2%, while Marvell Technology and Oracle also posted gains of around 2%.

Semiconductor stocks had come under pressure last week as investors rotated into other sectors.

South Korean memory chipmaker SK Hynix is also scheduled to debut on the Nasdaq later this week, reflecting continued investor demand for artificial intelligence-related semiconductor companies.

Investors focus on earnings and Federal Reserve

Attention is now shifting to the upcoming second-quarter earnings season, with analysts expecting strong profit growth from corporate America.

According to LSEG I/B/E/S estimates, S&P 500 companies are expected to report aggregate earnings growth of 24% year over year during the second quarter, while technology sector earnings are projected to increase about 65%.

Delta Air Lines and PepsiCo are among the major companies scheduled to report results later this week.

Economic data released Monday showed the Institute for Supply Management's non-manufacturing purchasing managers index edged down to 54.0 last month, matching market expectations.

Following last week's cooler-than-expected US jobs report, traders now see a 25% probability of a 25-basis-point interest rate increase at the Federal Reserve's July 29 meeting, according to CME's FedWatch Tool.

Market participants are also awaiting minutes from the Federal Reserve's latest policy meeting, due Wednesday.

Fed Governor Christopher Waller said forward guidance can be a "valuable tool" for monetary policy under the right circumstances but warned it can become problematic if applied inflexibly.

Mixed corporate moves across the market

Despite the broader rally, Microsoft shares declined after the company announced plans to reduce its workforce by about 4,800 employees, or approximately 2.1% of its staff.

Market participants viewed the layoffs as another sign of pressure on large technology companies balancing capital spending with profitability.

Meanwhile, O'Reilly Automotive shares fell after Bloomberg News reported that the company had submitted a cash offer to acquire Genuine Parts. Shares of Genuine Parts also declined.

Analysts said investor enthusiasm remains concentrated in a relatively small group of technology and semiconductor companies.