FX.co ★ Return of the Titans: Wall Street Closes Higher on Mega-Cap Stocks

Wall Street's three major indexes ended the day higher on Monday as investors turned their attention back to mega-cap stocks, helping the S&P 500 (.SPX) and Nasdaq Composite (.IXIC) recover from their worst weekly performance since April.

The Dow Jones Industrial Average (.DJI) also rose, reversing a two-day decline that began after hitting an all-time high on Wednesday's close.

Shares of major companies such as Alphabet (GOOGL.O) and Tesla (TSLA.O) rose between 2.2% and 5.1% after last week's big losses.

Nvidia (NVDA.O) rose 4.8% after analysts said the company was developing a version of its latest artificial intelligence chips for the Chinese market that complies with U.S. export control rules.

The information technology index (.SPLRCT) rose 2%, leading gains in the sector and snapping a four-day losing streak. "We believe today's move is more about a rebound from last week's sell-off than anything else," said Jason Pride, head of investment strategy and research at Glenmede.

One of the key factors worrying traders was the reassessment of the presidential race after US President Joe Biden announced his withdrawal and endorsed Vice President Kamala Harris in the November election on Sunday.

Biden's exit could prompt investors to change their strategies, betting that a victory for Republican Donald Trump would increase fiscal and inflationary pressures at home. However, some analysts believe markets could benefit from the increased likelihood of power-sharing in the next administration.

A Donald Trump win fell 4 cents to 60 cents, while a Kamala Harris win rose 12 cents to 39 cents, according to online betting site PredictIt.

Trump-linked stocks were mixed on Monday, with Trump Media & Technology Group (DJT.O) falling 0.8%, while software developer Phunware (PHUN.O) rose 4%.

With Biden's departure news out of the way, investors will be looking for answers to key questions such as who will be Harris' running mate in the Democratic presidential race and how far the vice president will deviate from Biden's policies.

Investors are looking to protect their portfolios from a potential big drop in U.S. stocks amid political uncertainty, strong tech earnings, and seasonal market weakness.

Rising interest in advances in artificial intelligence and a gradual decline in inflation have helped the S&P 500 (.SPX) rise nearly 17% this year. That gain has come during one of the most stable periods in recent memory, with the benchmark index going 355 sessions without a daily decline of 2% or more, the longest stretch since 2007.

The Cboe Volatility Index (.VIX), known as Wall Street's fear gauge because it measures demand for protection against market swings, hit its highest level since late April last week amid a sell-off in tech stocks that led to the S&P 500's second-biggest weekly drop in 2024.

Despite Monday's rebound in stocks, investors are voicing growing concerns about everything from tech giants' earnings to new twists in the U.S. presidential race.

Even companies like Nvidia (NVDA.O), whose shares have risen 138% this year, are being met with caution from investors.

Meanwhile, futures are pointing to investors' caution about potential volatility around the upcoming U.S. presidential election, which has already gone down in history as one of the most dramatic. On Sunday, President Joe Biden announced he was dropping out of the re-election race under pressure from his Democratic colleagues and endorsed Vice President Kamala Harris as the party's nominee to challenge Republican Donald Trump in November.

One factor contributing to potential volatility is the anticipation of earnings reports from major tech companies, with giants like Tesla (TSLA.O) and Alphabet (GOOGL.O) set to report their financial results on Tuesday afternoon.

The Russell 2000 small-cap index (.RUT) has gained 9% over the past 10 trading sessions, while the tech-heavy Nasdaq 100 (.NDX) has fallen 3% over the same period. The contrast is due to rising expectations that the Federal Reserve will soon cut interest rates, as well as Donald Trump's political outlook improving after he survived an assassination attempt.

That element of uncertainty adds to traders' worries about quarterly earnings reports, including those from two of the so-called "Magnificent Seven" — Alphabet and Tesla — which report their data this week.

The results of the upcoming reports will test how sustainable the recent rally in large-cap stocks is and whether the shift in focus to underperforming sectors will continue.

"We're seeing the market start to price in faster interest rate cuts, which is causing a shift in leadership to smaller caps and less focus on the big tech names," said Jason Pride, chief technology officer at Glenmede.

"Today is clearly different, but it's still a background trend," he added.

The S&P 500 (.SPX) rose 59.41 points, or 1.08 percent, to 5,564.41, while the Nasdaq Composite (.IXIC) rose 280.63 points, or 1.58 percent, to 18,007.57. The Dow Jones Industrial Average (.DJI) rose 127.91 points, or 0.32 percent, to 40,415.44.

Cybersecurity company CrowdStrike (CRWD.O) shares fell 13.5%, extending their losses after a software update caused a global outage on Friday.

Delta Air Lines (DAL.N) shares fell 3.5% after more than 600 flights were canceled as the company tried to restore operations following the outage.

Verizon Communications (VZ.N) shares fell 6.1% after second-quarter revenue fell.

Mattel Inc (MAT.O) shares soared 15.1% after Reuters reported that L Catterton had made an offer to buy the toy maker.

U.S. trading volume totaled 10.95 billion shares, slightly below the 11.37 billion share average over the past 20 trading days.