The S&P 500 and Nasdaq ended sharply higher on Monday, with Broadcom and other chip stocks rallying as investors bought shares in artificial intelligence-related companies expected to have a strong second-quarter earnings season.

Broadcom jumped in after the chipmaker and Apple agreed to extend a deal through 2031 to develop and supply a range of custom chips.

The S&P 500 information technology sector index rose, while the Philadelphia SE semiconductor index rose after two straight sessions of losses.

“This is a market that’s leaving a lot of people out. If you’re not in certain tech names, if you’re not in semiconductors, you’re basically missing the whole rally,” said Jack Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “I think it’s a very fragile rally. There is risk, especially if the Fed continues to see high interest rates for a long time.”

Capitalizing on strong investor demand for AI-related chip stocks, South Korea’s SK Hynix was set to debut on the Nasdaq this week.

Microsoft shares fell after the tech heavyweight said it was cutting about 2.1% of its workforce, or about 4,800 jobs.

“What the market is saying is that Microsoft cannot afford all of its CapEx and has yet to see a clear return on invested capital. Therefore, layoffs are seen as negative rather than moderating CapEx spending,” said Thomas Hayes, chairman of Great Hill Capital LLC.

In economic data, the Institute for Supply Management said its non-manufacturing purchasing managers’ index rose to 54.0 last month, matching expectations.

According to preliminary data, the S&P 500 rose 55.10 points, or 0.74%, to close at 7,538.34 points, while the Nasdaq Composite gained 288.49 points, or 1.12%, to close at 26,121.16. The Dow Jones Industrial Average rose 159.68 points, or 0.29%, to 53,053.59.

With Monday’s gains, the S&P 500 is up about 10% in 2026, and the Nasdaq has added about 12%.

With major US companies set to start reporting quarterly earnings in the next few days, investors have high expectations.

According to LSEG I/B/E/S, analysts expect S&P 500 companies to increase their revenue by a total of 24% year-over-year in the second quarter. Tech sector earnings are projected to grow by around 65%.

Delta Air Lines and PepsiCo are set to report results later in the week. Following last week’s cooler-than-expected jobs report, traders see a 25% chance of a 25-basis-point rate hike at the central bank’s July 29 meeting, according to CME’s FedWatch tool.

Hawkish bets rose after last month’s Fed meeting, the first under new chairman Kevin Warsh. Minutes left on Wednesday.

Fed Governor Christopher Waller said on Monday that forward guidance can be a “valuable tool” that accelerates the impact of monetary policy under the right circumstances, but can be problematic when used unpredictably.

Shares of O’Reilly Automotive fell after Bloomberg News reported on Thursday that the auto parts retailer sent a cash offer to buy Genuine Parts. Genuine parts also fell.