US stock market rally explained: Why did Nasdaq climb 2% to close at a fresh record high?

Wall Street recorded sharp gains on Monday, with the tech-heavy Nasdaq rallying more than 2% to close at a record high level as oil prices cooled down, Treasury yields eased, and chip stocks soared.


Nasdaq closed at 27,122 on Monday, notching its first record-high close since June 2. S&P 500 neared its record-high close, jumping 1.5% to close at around 7,765. This came as oil prices continued to fall, briefly dipping below $100 per barrel to their lowest level since September 9.

Oil prices ease

While the US and Iran continued to exchange threats over the weekend, US President Donald Trump said he is open to meeting his Iranian counterpart Masoud Pezeshkian, who is expected to be in New York this week for the United Nations General Assembly. Investors now hope for some diplomatic progress on the Middle East war due to this week's UN meeting and eye a partial recovery in shipments from Saudi Arabia.

Investors are pinning their hopes on a breakthrough in peace talks this week, Reuters quoted Tamas Varga, analyst at PVM Oil Associates. "Just a couple of days ago that would have seemed like a very far-flung idea…It's a move in the right direction,” the report cited Bob Yawger, director of energy futures at Mizuho.

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Treasury yields cool down

Wall Street’s rally also came as the sharp rally in US bond yields cooled down slightly. The yield on the 10-year Treasury eased to 4.95% on Monday, from 5.01% late Friday after crossing above the 5% threshold last week for the first time since 2023.

This came as oil prices cooled down, helped by tentatively improving risk sentiment over central banks’ commitments to bring inflation back to target and growing oil flow through the Strait of Hormuz.

Chip stocks rally

Meanwhile, a sharp surge in chip stocks pushed the benchmark index sharply higher. Advanced Micro Devices shares soared 10% to hit $1 trillion in market capitalisation for the first time. Intel shares rallied over 12% while Arm Holdings skyrocketed 17%.

This comes amid signs that suggest AI spending is still expanding, despite the recent tech selloff following safety warnings from top executives of AI giants last week. Anthropic CEO Dario Amodei, in a long X post, ‌called on AI companies to slow the rate at which they advance model capabilities amid mounting fears of misuse of artificial intelligence. The Anthropic CEO wrote that in nearly a year, AI agents "could be capable of taking over the entire internet, potentially causing hundreds of billions of dollars in damage." The world’s richest man, Elon Musk, who runs xAI, and OpenAI CEO Sam Altman said they agreed with Amodei.

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(With inputs from agencies)

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