Stocks had their best day in more than a month on Monday, as a rally in technology shares combined with falling oil prices to lift the broader market.
The S&P 500 rose 1.5 percent and the Nasdaq 100 climbed 2.8 percent, marking their strongest session since early August. The move capped a choppy stretch for markets that included the Federal Reserve's rate increase the previous Wednesday, which had initially unsettled investors, followed by a partial rebound and a mixed finish to last week.
Two forces drove Monday's gains. The first was a renewed burst of enthusiasm for artificial intelligence stocks, discussed in more detail below. The second was oil. Brent crude, which had climbed toward the highs of the year amid the ongoing conflict between the United States and Iran, eased back toward 100 dollars a barrel as hopes rose for diplomatic progress toward ending the fighting. Cheaper oil helped calm inflation worries, and the 10 year Treasury yield, which had touched its highest level in nineteen years during the Fed's meeting week, fell back below 5 percent.
The easier borrowing costs and calmer energy prices rippled across other markets too. Bitcoin rose past 86,000 dollars. Volatility, as measured by the VIX index sometimes called Wall Street's fear gauge, eased notably from the highs it hit during the Fed meeting.
Trading volumes are likely to stay active this week as the third quarter draws to a close, a period traders call window dressing season, when fund managers adjust their holdings before reporting results to clients. A light week for economic data leaves earnings as the main catalyst, with AutoZone and KB Home reporting Tuesday, followed by Cintas, Paychex and General Mills on Wednesday, and Darden Restaurants and Costco on Thursday alongside August new home sales figures.
Friday brings August durable goods orders and the final September reading of the University of Michigan's consumer sentiment survey, both closely watched gauges of household and business confidence.
Why did stocks rally so strongly on Monday?
A rebound in AI and chip stocks combined with falling oil prices and easing bond yields, reversing some of the anxiety from the Fed's rate hike the week before.
Is the market still worried about inflation?
Some concern remains, but falling oil prices have eased the near term pressure that had been pushing bond yields and inflation expectations higher.