US stocks closed slightly higher on Monday, with AI optimism fueling upward momentum even as the earnings-driven fervor of the recent rally eased in the home stretch of reporting season and as crude prices rose, stoking inflation worries as US-Iran peace negotiations stalled.

All three major US stock indexes advanced and the S&P 500 and the Nasdaq eked out their latest in a series of all-time closing highs.

Semiconductors handily outshone other sectors, with the PHLX Semiconductor index jumping 2.6 percent, suggesting the AI wave is showing few signs of abating.

"The semis and AI infrastructure trade has taken on a life entirely of its own," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "And there's so much momentum and chasing to get in on some of these names that it seems almost somewhat divorced from any sort of like headline or announcement."

But some market watchers believe the rally is about to run out of momentum. Investor Michael Burry warned on Monday that stocks are likely about to crash.

In a post on his Substack, Burry, one of the biggest winners of the 2008 financial meltdown, said that the 2026 rally in tech stocks is about to end with a thud. "The market has jumped the shark," he wrote.

First-quarter reporting period is nearing the finish line, with 440 of the companies in the S&P 500 having reported. Of those, 83 percent have topped earnings expectations, according to LSEG IBES. As of Friday, analysts estimated first-quarter S&P 500 earnings growth, on aggregate, of 28.6 percent year-on-year. That's nearly double the 14.4 percent first-quarter growth estimates as of April 1.

"The strength of the rally largely is a function of earnings growth, which is superb," said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis. "Market watchers are looking ahead to next week, when the big-box retailers report, to get a sense of if there's any change in consumer spending behaviour following, you know, elevated prices at the gas pump."

But as earnings season nears the finish line, focus returns to macroeconomics and geopolitical developments. US President Donald Trump dismissed Iran's response to a US peace proposal, causing crude prices to spike and stoking concerns that a prolonged conflict will keep putting upward pressure on inflation, particularly at the gasoline pump, where consumers are feeling the pinch.

The Dow Jones Industrial Average rose 95 points, or 0.2 percent, to 49,704, the S&P 500 gained 13 points, or 0.2 percent, to 7,412 and the Nasdaq Composite gained 27 points, or 0.1 percent, to 26,274.

Intel rose 3.6 percent on Monday after surging 14 percent on Friday on a report of a preliminary chip-making agreement with Apple, while peer Qualcomm jumped 8.4 percent to a record high. Media major Fox Corp rose 7.6 percent after beating third-quarter revenue estimates.

Among other movers, some airline stocks slipped as rising oil prices threatened to squeeze margins. Southwest Airlines , Delta Air Lines, Alaska Air and United Airlines fell between 2.9 percent and 4.4 percent. (Reuters)



Edited by Cecil Wong