U.S. stock market reaches new highs as oil prices fall to a 26-year low

Article by: Tide Research

After the long weekend, funds flowed back into the stock market in one go, with all three major indices closing higher and halting the decline that followed last week’s non-farm payrolls report. Saudi Arabia slashed its August crude oil official price to the deepest cut in nearly 26 years, causing oil prices to drop below pre-conflict levels. A single statement from Trump expressing support for cryptocurrencies triggered a V-shaped rebound in Bitcoin by midday.

The S&P 500 rose 0.72% to close at 7,537.43. The Dow Jones Industrial Average gained 0.29% to 53,055.91, closing above its previous all-time high set on the non-farm payrolls day (July 2). The Nasdaq Composite advanced 1.12% to 26,121.16, while the Nasdaq-100 rose 1.26% to 29,697.873, with both tech indices leading the rally. The Russell 2000 edged up 0.45% to 3,009.541. The VIX declined 1.58% to close at 15.56.

Among the Magnificent Seven, Tesla led the gains, rising 6.69%, while Meta increased 2.98%, Google A rose 1.82%, Apple climbed 1.31%, Amazon gained 0.61%, NVIDIA added 0.37%, and Microsoft was the only one to close lower, declining 0.96%. Chip stocks surged broadly, with the Philadelphia Semiconductor Index rising 2.17% to 12,900.142. TSMC ADR jumped 4.07%, AMD rose 6.61%, and Western Digital gained over 7%. The rally was supported by NVIDIA confirming its server roadmap remains unchanged, Broadcom and Apple extending their chip manufacturing agreement through 2031, and Hon Hai reporting a nearly 40% year-over-year revenue increase in Q2, surpassing market expectations.

Cryptocurrencies outperformed gold, with Bitcoin closing at $63,571, up about 1.4%, and Ethereum at $1,787, up 0.7%; gold declined to $4,162, down approximately 0.4%. Bitcoin briefly dropped to around $61,000 during trading due to Strategy LLC selling approximately $216 million in holdings—this was the second such large-scale reduction this year. The price rebounded after Trump publicly endorsed cryptocurrencies from the White House that day, pushing Bitcoin back to its intraday high before closing. Crude oil was the weakest performer, with Brent crude falling to $71.75, its lowest level since late February this year. U.S. Treasuries and exchange rates remained relatively stable, with the 10-year yield slightly declining by 2 basis points to 4.47%, and the USD/JPY rising to 162.03.

This latest price cut by Saudi Arabia is the largest in nearly 26 years, with the previous instance of discounted oil sales occurring during the 2020 price war. The primary driver is excessive spot inventory, while market share gains are relatively secondary; the market is concerned whether other Gulf oil producers will be forced to follow suit. Meanwhile, OPEC+ has raised its August production target by another 188,000 barrels per day, indicating no immediate relief in supply-side pressure.

The U.S. ISM services index for June, released on Monday, showed a slight slowdown in the pace of expansion, but hiring improved and cost pressures eased. The report also noted that many industries plan to raise prices, indicating that inflationary pressures have not truly subsided.

Wallace’s remarks during a meeting in Rome signaled that he is still willing to use forward guidance as a tool, but he is currently more concerned about inflation risks. The market has reached a consensus that the first FOMC minutes under Wash’s leadership will likely be more restrained in language than in the past; even so, traders are pricing in around 30 basis points of rate hikes by 2026—higher than the level seen before Wash’s appointment.

There are two differing perspectives on the semiconductor sector. Morgan Stanley’s Mike Wilson is drawing parallels between the current price action and the pre-crash pattern of silver, reigniting discussions about bubble risks. Meanwhile, BlackRock is focused on whether AI can sustain profit margins at their currently elevated—and unusual—levels, with valuation being a secondary concern. UBS’s focus is more pragmatic: this week, they’re watching two key developments—whether tech stock volatility can truly stabilize, and whether major cloud providers will be forced to cut capital expenditures.

SK Hynix's U.S. IPO roadshow officially launched on Monday, targeting $430 trillion KRW in funding; management has secured indicative commitments from major investors of up to $7 billion.

This rally resembles a one-time release of pent-up sentiment accumulated over a long weekend, with no new fundamental variables emerging. Capital has shifted back from bond markets to equities, with cyclical stocks outperforming defensive ones—liquidity normalization has been the true driver of price movements over the past two days. Key risks remain concentrated: semiconductors are being compared to the price action preceding silver’s collapse, and Saudi Arabia’s largest price cut in nearly 26 years has reignited concerns about oversupply; both factors could abruptly halt the rally. The true turning point comes on Thursday: if the first FOMC minutes under Waugh are even more dovish than market expectations, this rally will likely hold through the start of earnings season; but if the minutes unexpectedly turn hawkish, semiconductors and oil will be the first to buckle.