Wall Street's main indexes were on track to open higher on Monday, as chip stocks recovered from last week's pullback and investors awaited a key slate of earnings from major technology companies that have powered the market's AI-driven rally.
The second-quarter earnings season will pick up pace later this week, with reports due from several major companies, including Alphabet, Tesla, Intel and IBM.
Investors will closely watch earnings from Intel and Texas Instruments for signals on whether the semiconductor sector can regain momentum after a sharp reversal.
A surge in AI capital spending by hyperscalers has been a major driver behind this year's market gains, lifting chip stocks and other companies that are seen as the beneficiaries of the buildout, and helping the tech-heavy U.S. indexes hit record highs.
But last week's pullback raised concerns that the rally had run too far.
The Philadelphia SE Semiconductor Index ended Friday more than 20% below its late-June record high, confirming a bear-market decline. It was still up about 65% year to date.
On Monday, memory chipmakers were leading the gains in broadly higher semiconductor stocks.
Western Digital, Seagate Technology, Micron Technology and SanDisk were up between 3.7% and 4.7% in premarket trading.
"There's just a little less room for error in the market at this point. Any sort of events or earnings news could probably move the market down," said Jack Herr, senior investment analyst at GuideStone Funds.
"As we move into the second half of the year, market expectations are higher than they were before".
Markets are expecting S&P 500 earnings growth of 26% for the second quarter, year-on-year, up from an earlier estimate of 23.7%, according to data compiled by LSEG.
At 08:44 a.m. ET, Dow E-minis were up 73 points, or 0.14%, and S&P 500 E-minis were up 27.75 points, or 0.37%. Nasdaq 100 E-minis were up 235 points, or 0.82%.
Last week's declines in major U.S. indexes came despite benign inflation data that eased some concerns about a Federal Reserve rate increase this month, and a solid start to second-quarter earnings season from major U.S. banks.
Markets are pricing in about a 12% chance of a quarter-point rate hike at the Fed's July meeting and a roughly 53% chance of another hike in September, according to CME's FedWatch tool.
Investors were closely watching the developments in the U.S.-Israeli war with Iran after a recent escalation in the nearly five-month-old conflict.
Brent crude briefly climbed above $90 a barrel for the first time since early June on renewed disruption to shipping through the Strait of Hormuz after Iran's Foreign Ministry said mediators had recently presented proposals to Tehran. Among other premarket movers, Domino's Pizza gained 6.2% after the pizza chain's quarterly revenue edged past Wall Street estimates. - Reuters
