This week, US stocks will simultaneously face three variables: high interest rates, high oil prices, and policy changes.
Written by: Trend Research
Last week, US stocks concluded with divergence amid post-rate-hike volatility. The Dow Jones Industrial Average fell 1.7% for the week, marking its largest weekly decline since March, while the Nasdaq rose 0.7%, with chipmakers and AI hardware continuing to outperform the broader market. Geopolitical tensions in the Middle East flared up over the weekend, as Houthi forces attacked Riyadh and the US and Iran exchanged strong signals. Oil prices reclaimed $101 on Monday; meanwhile, high-level US-China talks were held in New York focusing on AI, tariffs, and critical minerals. This week, US equities will face a triple variable of high interest rates, elevated oil prices, and policy shifts.
Chip Stocks Rally for Fourth Consecutive Day, Philadelphia Semiconductor Index Outperforms Broader Market for the Week
The Philadelphia Semiconductor Index rose 2.78% to 11,921.69 points on Friday, rallying for a fourth straight trading day. SanDisk gained approximately 11%, Lumentum advanced more than 4%, and chip equipment stocks continued to show strength.
The S&P 500 rose 0.17% to 7,650.50 points on Friday, the Nasdaq Composite gained 0.40% to 26,522.550, and the Dow Jones Industrial Average fell 0.18% to 51,682.64. The VIX dropped 4.08% to 14.81.
Breadth remained weak, with decliners outnumbering gainers on both the NYSE and Nasdaq. The Magnificent Seven showed mixed performance: Nvidia rose 1.34%, Amazon gained 1.00%, and Alphabet advanced 0.64%; Apple fell 0.26%, Tesla dropped 0.53%, Microsoft declined 0.80%, and Meta slipped 2.43%. The Nasdaq Golden Dragon China Index rose 0.76% to 5,787.39 points.
Early-week controversies over AI safety initially triggered sharp sell-offs in chip stocks, but optical communications, memory, and chip equipment sectors quickly rebounded. While index gains were modest, strong thematic focus within tech grew increasingly concentrated. SanDisk’s current rally is directly tied to the fundamental logic of rising memory chip prices, as capital flows into hardware segments with clear earnings support.
10-Year Treasury Yields Reclaim 5%, Rate-Hike Pricing Rises to 55%
Interest rate pressures resurfaced last Friday. The 2-year US Treasury yield climbed to 4.76%, and the 10-year yield rose to 5.01%, breaking above the 5% threshold once again. With the Fed just initiating another round of rate hikes, market pricing for a further 25-basis-point increase in October has risen to around 55%.
While high interest rates continue to weigh on growth stock valuations, semiconductors still managed to outperform the broader market, indicating that recent industry catalysts and earnings expectations are providing stronger support for certain tech names.
WTI crude fell 1.58% to $100.30 per barrel on Friday, while Brent crude dipped 0.93% to $104.87. Spot gold rose 1.2% to around $4,390.
Bitcoin Reclaims $80,000, Cryptocurrency-Related Stocks Surge
Bitcoin jumped nearly 6% on Friday to reclaim the $80,000 level, while Ethereum climbed to around $2,611.
Coinbase rose approximately 12%, Strategy gained about 15%, and Robinhood climbed nearly 9%. The sector had previously faced pressure after progress on US cryptocurrency market structure legislation stalled, but recent advancements in tokenized stocks and digital asset regulations have prompted a quick rebound in crypto assets.
Pacing of regulation remains the most direct catalyst for this theme, and this week will see continued focus on whether US digital asset policies make new progress.
Buffett Steps Down as Chairman of Berkshire Hathaway
Berkshire Hathaway completed a new leadership transition last Friday. At 96, Warren Buffett officially stepped down as chairman, transitioning to honorary chairman and remaining on the board, while his eldest son, Howard Buffett, assumed the role of non-executive chairman.
Greg Abel took over as CEO earlier this year, and remains responsible for daily operations and major capital allocation. Berkshire currently holds cash reserves approaching $365 billion, and how Abel deploys funds following the transition will become a key focus for investors.
Middle East Tensions Escalate Again Over the Weekend, Oil Prices Reclaim $101
Oil prices had just pulled back on Friday before geopolitical developments changed course again over the weekend.
Houthi forces launched missile and drone attacks on Saudi capital Riyadh, prompting a subsequent US security alert. Trump again called on Iran to reach an agreement on Sunday, while Iranian military officials warned that new military actions would trigger sustained retaliation.
Shipments through the Strait of Hormuz remain restricted, and risks along the Red Sea shipping route have risen once again. In Monday’s Asian morning session, WTI returned to around $101, while Brent crude traded above $104.
If oil prices continue to climb, they could rekindle inflation expectations and further cement market pricing for subsequent rate hikes. Kashkari reiterated over the weekend that US inflation pressures have already spread to sectors such as services, with energy prices remaining a key variable.
US-China Talks Focus on AI and Critical Minerals
US Treasury Secretary Bessent and Chinese State Council Vice Premier He Lifeng began consultations in New York on Sunday in preparation for the upcoming meeting between Trump and Xi Jinping.
Negotiations covered AI safety, tariffs, rare earth and critical mineral supplies, as well as agricultural products and Boeing aircraft purchases. What impacts US equities the most remains AI, semiconductor policy, and critical mineral supply chains.
If new policy arrangements emerge, sectors including Nvidia, semiconductor equipment, autos, and aviation could react swiftly.
This Week’s Watchlist
Fed Officials’ Comments on Wednesday. Following the rate hike, several Federal Reserve officials will speak. Continued hawkish signaling could push October rate-hike pricing higher from 55%; dovish remarks may provide temporary relief for long-end yields.
Follow-ups on US-China Consultations. Both sides will continue discussions on AI, semiconductors, tariffs, and critical minerals this week. Any concrete breakthroughs could impact Nvidia, semiconductor equipment, rare earth supply chains, and Boeing.
Whether Bitcoin Can Hold the $80,000 Level. Crypto assets’ correlation with US Treasury yields has been unstable recently, with regulatory developments exerting a noticeably stronger influence. If Bitcoin maintains its strength and lifts crypto-related stocks, it indicates improving market risk appetite; a pullback would suggest liquidity remains constrained under a high-interest-rate environment.