Chip stocks broke their longest losing streak since 2008, but the rally faded into the close

After eight straight losing sessions, chip stocks finally had a winning day. The bounce lifted the Nasdaq on Monday, but it lost a good part of its strength in the afternoon, and the blue-chip Dow never joined in. The result was a split close that left investors with a clear question for the rest of the week: was this the start of a recovery, or just a pause in the selloff?

How the session ended

The Nasdaq Composite rose 290.85 points, or 1.11%, to 26,430.89, according to Reuters and Yahoo Finance closing data. The S&P 500 gained 31.29 points, or 0.41%, to 7,690.73. The Dow Jones Industrial Average fell 36.38 points, or 0.07%, to 51,966.03.

Those closing figures were well below where the market traded earlier. Around midday, Reuters had the Nasdaq up 1.52% and the S&P 500 up 0.74%. Reuters said the indexes pulled away from their peaks for the day and that the advance leaned heavily on the largest stocks. A midday tally from TechCortex showed 334 S&P 500 stocks falling against 150 rising, even as the index itself was higher.

Consumer discretionary and technology led the S&P 500's 11 sectors, while the defensive utilities and real estate groups lagged, Reuters reported. The Cboe Volatility Index, often called Wall Street's fear gauge, fell 7.75% to 18.44, per Yahoo Finance data.

The chip streak ends

The Philadelphia Semiconductor Index closed up 1.61% at 11,316.34, according to Reuters and Yahoo Finance. That snapped an eight-day losing streak in which the index fell about 15.7%, its longest run of declines since October 2008, Reuters said. During that stretch the index shed roughly $2 trillion in market value, according to an earlier Reuters report.

"Rubber bands can only stretch so far in one direction before they snap and start reversing, and you finally saw that enough-is-enough moment in the semiconductors after Friday's close," Michael James, managing director and equity sales trader at Rosenblatt Securities, told Reuters. He added that "nothing changed between Friday's close and this morning's open, other than nothing bad happened over the weekend," and cautioned that the market is "far from out of the woods."

Memory and networking names led the way. Sandisk closed up 5.53%, Marvell Technology 4.06% and Micron Technology 2.97%, according to Yahoo Finance closing data. Intel rose 2.43% after an upgrade from J.P. Morgan, and Nvidia gained 1.38%.

The companies at the center of last week's AI financing scare had a more mixed day. Data center operator Applied Digital closed up 6.65%. CoreWeave, which lost about a quarter of its value last week over worries about its roughly $50 billion debt load, closed down 0.44% at $61.12, giving up early gains that followed an upgrade to buy from Goldman Sachs. Earlier in the day the yield on CoreWeave's bond due 2031 had eased 19.5 basis points to 15.13%, according to Tradeweb data cited by Reuters.

Oil turned higher late

Energy markets removed some of the support stocks had in the morning. Crude prices fell early after President Trump waived a set of new Russia sanctions, but U.S. crude oil futures reversed those losses to settle up 2.2% at $103.66 a barrel, Reuters reported, after attacks by Yemen's Houthis and renewed attacks on Saudi energy, airport and military facilities. The December WTI contract settled 48 cents higher at $98.54, according to Newsquawk. Gold slipped about 0.6%, per Yahoo Finance futures data.

Rates and the Fed

The 10-year Treasury yield ended near 5.14%, according to Yahoo Finance data, after FXStreet reported it up about six basis points during the afternoon as oil rose. That followed the 10-year's biggest weekly drop in seven months last week, Reuters noted.

Fed officials are now in their quiet period before the October 27-28 meeting. Futures markets put the odds of an October rate hike at about 16% and a December increase at about 92%, FXStreet reported, consistent with the roughly 84% probability of an October hold cited by FX.co. Monday's only notable data point was soft: the National Association of Home Builders housing market index fell three points to 29, its lowest since June 2012 and below the 31 economists expected, according to Reuters.

What carries into tomorrow

The week's real test is earnings. SpaceX is scheduled to report on Tuesday and Netflix after Tuesday's close, followed by Meta and Tesla on Wednesday, with chipmakers Lam Research and Texas Instruments also due this week, Reuters reported. Goldman Sachs estimates five AI hyperscalers, including Meta, will lift combined capital spending to about $1.2 trillion next year, according to Reuters.

After a day when the chip bounce faded and most stocks in the S&P 500 spent the session lower, those reports will show whether the spending that powered the AI trade is still on track, and whether Monday's relief can turn into something more durable.