Dow rises 140 points as chip stocks rebound ahead of Big Tech earnings

US stocks opened higher on Monday as semiconductor stocks recovered from last week's selling, while investors awaited key earnings announcements in the week. 

The Dow Jones Industrial Average rose 143 points, or 0.28%. The S&P 500 advanced 0.56%, while the Nasdaq Composite traded 0.87% higher. 

The recovery followed a difficult week for US equities, with the S&P 500 falling 1.6%, the Nasdaq Composite dropping 2.9%, and the Dow Jones Industrial Average losing 0.9%. 

Semiconductor stocks were among the biggest drags, with the VanEck Semiconductor ETF (SMH) falling nearly 9% for its third weekly decline in four weeks.

Chip stocks recover after last week's selloff

Semiconductor shares led gains on Monday as investors returned to the sector following last week's sharp pullback.

Memory chipmakers posted some of the strongest advances. 

Western Digital, Seagate Technology, Micron Technology and SanDisk rose between 4% and 6% in trading. 

Elsewhere in the sector, Advanced Micro Devices gained about 4.3%, while Astera Labs and Teradyne advanced more than 5%. 

The VanEck Semiconductor ETF climbed more than 2.6%.

The rebound came after the Philadelphia Semiconductor Index entered bear market territory on Friday, closing more than 20% below its late-June record high. 

Despite the recent decline, the index remains up about 57% so far this year.

The semiconductor sector has been one of the primary beneficiaries of heavy artificial intelligence spending by hyperscale technology companies. 

This has helped drive US equity indexes to record highs in the year. 

However, last week's selloff raised concerns that valuations had become stretched following months of strong gains.

Big tech earnings take center stage

Investor attention is now turning to second-quarter earnings, with several major technology companies scheduled to report results later this week.

Alphabet, Tesla, Intel and IBM are among the companies due to release quarterly earnings, while Intel and Texas Instruments will be closely watched for indications of whether the semiconductor industry can regain momentum following the recent correction.

According to LSEG data, analysts now expect S&P 500 companies to deliver year-over-year earnings growth of 26% for the second quarter, up from an earlier estimate of 23.7%.

The latest earnings season follows encouraging inflation data released last week, which eased some concerns about near-term Federal Reserve tightening. 

Major US banks also delivered a solid start to second-quarter reporting, although those positive developments were overshadowed by weakness across technology stocks.

Markets are currently pricing in about a 12% probability of a quarter-point interest rate increase at the Federal Reserve's July meeting and roughly a 53% chance of another increase in September, according to CME's FedWatch Tool.

Geopolitics and oil prices remain in focus

Investors also continued to monitor developments in the conflict involving the United States and Iran.

The United States carried out its ninth consecutive day of strikes on Iran overnight. 

However, market sentiment improved after Iranian officials indicated that intermediaries had continued exchanging messages with Tehran, raising hopes that diplomatic discussions could continue.

Oil prices fluctuated throughout the session. 

Brent crude briefly traded above $90 per barrel for the first time since early June amid renewed disruptions to shipping through the Strait of Hormuz before easing to trade above $88. 

US West Texas Intermediate crude also pared earlier gains to trade just above $82 per barrel.

Outside the technology sector, Domino's Pizza shares gained about 3% in trading after the company reported quarterly revenue that slightly exceeded Wall Street expectations.