The U.S. stock market kicked off the week with a confident rally, regaining its footing after Friday’s slump. On Monday, the S&P 500 rose 1.47%, the Dow Jones gained 1.34%, and the Nasdaq 100, once again the market’s main engine, climbed nearly 1.87%. September futures mirrored the optimism, with S&P E-mini up 1.58% and Nasdaq E-mini up 1.96%.
The reasons behind the surge are clear. Investors breathed a sigh of relief after soft labor market and manufacturing data convinced many that the Federal Reserve may finally cut rates in September. The probability of a rate cut, according to Fed funds futures, jumped from 40% to 90% in a single day. At the same time, tech giants and chipmakers came roaring back to life, pulling the broader market higher.
Economic data on Monday painted a mixed picture. June factory orders in the U.S. fell 4.8% from May, the sharpest drop in over five years, though perfectly in line with expectations. Excluding transportation, however, orders rose 0.4%, marking the strongest gain in seven months and beating forecasts. For Wall Street, this combination is almost ideal: signs of a cooling economy that could prompt a dovish Fed, but no outright signals of an impending recession.
Meanwhile, trade policy drama continues to simmer in the background. President Donald Trump said Monday he plans to sharply raise tariffs on Indian imports in response to its purchases of Russian oil, escalating a trade chess match that began last week with new tariffs on Canadian goods. Starting August 7, a 10% global minimum tariff will take effect, along with higher duties on countries running trade surpluses with the U.S. If fully implemented, the average U.S. tariff would rise to 15.2%, up from just 2.3% a year ago.
The bond market had its own story to tell. The yield on 10-year Treasuries fell to 4.192%, a one-month low, as bond prices climbed. Soft economic data and a 1% drop in oil prices lowered inflation expectations, boosting demand for safe-haven assets. European bonds followed suit, with German 10-year yields sliding to 2.624% and U.K. 10-years to 4.509%.
The day’s market heroes were tech and semiconductor stocks. Nvidia, Alphabet, and Meta rose more than 3%, Microsoft and Tesla added over 2%, and chipmakers broadly rallied in their wake. Corporate headlines added color: Steelcase soared 60% on news of its acquisition by HNI, and Idexx Labs jumped 27% after a strong earnings beat and raised profit guidance. On the flip side, ON Semiconductor plunged 16% on disappointing margin forecasts, and Berkshire Hathaway slipped over 3% after reporting lower operating earnings.
The week ahead promises plenty of catalysts. Investors are watching for fresh trade balance data and the ISM services index on Tuesday, followed by jobless claims and productivity numbers on Thursday. All of it is setting the stage for the Fed’s September meeting, now seen as a pivotal moment for markets.
For now, Wall Street is running on hope—hope that a softer monetary stance and robust corporate earnings will keep the rally alive. But the tension is still palpable: tariff risks and macro volatility could quickly turn this burst of optimism into another wave of caution.