AI chips drive a post‑holiday surge as markets look past Iran risk—for now

AI and chip stocks took the wheel today, pulling the big indexes back toward record territory, even as war headlines and an ongoing energy shock stayed in the background. If you’re looking at your screen thinking, “How is the market up with all this going on?” you’re not alone—but money clearly flowed back into riskier, growth‑y names.

The day in a sentence

Tech and high‑beta stocks ripped higher—especially anything tied to AI chips—lifting the Nasdaq and small caps, while energy slumped and bond yields eased as traders leaned into peace‑talk optimism over Iran.

What actually moved

As trading resumed after the long weekend, the S&P 500 climbed about 0.6%, the Nasdaq jumped more than 1%, and small caps surged nearly 2%. The Dow, though, slipped slightly, which tells you this was not a “everything up” kind of day—it was a growth and AI day.

Semiconductors were the poster child. Micron rallied almost 20%, AMD nearly 8%, and other chip names like Intel and Tesla-adjacent AI plays moved sharply higher. Sector-wise, technology was up almost 2.7%, easily topping the board, with industrials and basic materials also solidly green.

At the same time, the equal‑weight index—where every stock counts the same—was up a bit more than 1%. That’s important: this wasn’t just the usual “Magnificent Seven” show, even though their earnings have surged over 60% year‑on‑year. Smaller and more cyclical names joined in.

Who got left behind

Energy had a rough session, down almost 2.8%, even though 2026’s energy turmoil is being compared to the 1973 oil crisis. Oil prices are still elevated and volatile, but hopes for progress on reopening the Strait of Hormuz and an eventual Iran ceasefire kept traders from piling into energy stocks today.

Classic “safety” areas—consumer staples and healthcare—also lagged or fell. Low‑volatility funds dipped slightly while high‑beta and momentum funds spiked, a clear sign investors were willing to take more risk for more upside.

Rates, inflation, and the shrinking cushion

In the bond market, the 10‑year Treasury yield slipped about 0.06 percentage points to roughly 4.5%, reversing part of last week’s jump. The yield curve between 2‑year and 10‑year notes is back to a more normal shape, and volatility gauges like the VIX are sitting in the mid‑teens—low but not sleepy.

Under the surface, though, inflation has been heating up again over the past few months, and the gap between stock earnings yields and bond yields—the “extra” reward for holding stocks—has narrowed. That means the cushion for stocks versus safer bonds is thinner than it was, even as indexes sit near records.