Stocks Settle Sharply Higher as Crude Prices Plunge and Chipmakers Soar

The S&P 500 Index ($SPX) (SPY) closed up by +1.49% on Monday, the Dow Jones Industrial Average ($DOWI) (DIA) closed up by +0.71%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.83%. December E-mini S&P futures (ESZ26) rose +1.50%, and December E-mini Nasdaq futures (NQZ26) rose +2.84%.

Stock indexes rallied sharply on Monday, with the S&P 500 posting a 5-week high and the Nasdaq 100 posting a 3-month high. Stocks surged Monday after crude oil prices plunged, pushing bond yields lower and improving market sentiment. WTI crude sank more than -4% to a 1.5-week low, and the 10-year T-note yield fell -3 bp to 4.96%. Also, positive anticipation ahead of a summit later this week between Presidents Trump and Xi Jinping is lifting equity markets. In addition, stock indexes rose on support from a rally in chipmakers and AI-infrastructure stocks, along with a rally in cryptocurrency-exposed stocks, as Bitcoin's price surged to a 7.5-month high.

Stocks garnered support on Monday on optimism about talks between the US and China after US and Chinese officials offered upbeat assessments of their talks on artificial intelligence, trade, and investment ahead of this week's summit between Presidents Trump and Xi Jinping. US Trade Representative Jamieson Greer said, "The focus is on stability between the US and China," and we are working on a trade truce extension.

Monday's US economic news showed the Aug Chicago Fed national activity index fell -0.12 to -0.04, right on expectations.

Hawkish Fed comments on Monday were negative for stocks and bonds. Chicago Fed President Austan Goolsbee said that to restore price stability, the Fed may need to raise interest rates further and narrow the gap between supply and demand, which could lead to drops in employment, wages, and growth. Also, St. Louis Fed President Alberto Musalem said core inflation may be running 1 percentage point above the Fed's 2% target and that the Fed likely needs to hike interest rates further.

Bitcoin (^BTCUSD) surged by more than +7% on Monday to a 7.5-month high, adding to last Friday's +5% surge, after the SEC moved forward with a plan to allow digital versions of securities to start trading in the US.