US stock markets bounce back on Monday; Dow and NASDAQ 100 jumps 1%, NVIDIA plunges 2.6% on credit guarantee news

US stock markets opened in the green across the board amid a sharp fall in energy prices. Crude oil prices fell more than 10% on Monday after Iran and the US agreed to halt strikes. The Dow Jones jumped 557 points or 1%, the S&P 500 rose 53 points or 0.7% on Monday evening, erasing the previous week’s losses. The tech-heavy NASDAQ 100 index jumped nearly 300 points or 1% on Monday, despite losses in chip stocks.

The Brent crude oil price traded 12% lower at $86.9 per barrel, and the WTI crude oil price fell 6.8% to $84.2 per barrel, erasing the previous week’s entire gains in a single session after US and Iran halted strikes, increasing the hopes for diplomatic dialogue.

The sharp fall in crude oil prices also led to a sharp downtick in US Treasury yields as inflation fears also fell along with crude oil prices. The US 10Y yield made an intraday low of 4.62% on Monday after hitting the 4.7% mark on Friday. The 30-year yield also fell to 5.11% as compared to the previous week’s intraday high of 5.19%.

On the stock-specific front, chip stocks extended their fall despite the broader positive sentiment in the markets. Shares of Nvidia, Micron, SanDisk, and Qualcomm plunged as much as 4% on Monday evening, as investors continued to remain cautious on heated valuations in the tech stocks.

Meanwhile, the Magnificent Seven stocks like Alphabet, Amazon, Meta, Microsoft, Tesla and Apple posted a mixed performance with gains of up to 2.5%.

NVIDIA shares were particularly in focus as media reports claimed that the chip maker is planning to give $250 billion financing guarantee to OpenAI for massive data centre infrastructure project. Investors remain cautious of this as the shares plunged 2.69%.

Since OpenAI lacks investment-grade credit rating, NVIDIA’s guarantee would open gates of financing at lower costs. Additionally, the 10 GW data centre would create purchase opportunity of up to $350 billion worth of NVIDIA chips.

Investors remain cautious on this indirect customer demand driven by company’s balance sheet’s credibility.