Chip stocks rebound, Nasdaq opens up 1.3%, Philadelphia Semiconductor Index rises over 3%, oil prices retreat from highs, US Treasuries rise

Memory chip and optical communication sectors posted broad gains at market open. Among memory chips, Western Digital rose about 5%, SanDisk jumped about 7%, while Micron Technology, SK Hynix and Seagate Technology all advanced around 4%. In optical communication, Marvell Technology was up about 5%, while Credo and Lumentum each climbed about 4%, and Corning and Coherent both gained around 3%.

CoreWeave rallied over 6% at the open, after plunging 25% last week. The company remains in the spotlight due to persistent AI financing pressures, with its junk bond yields surging to 15%, underscoring looming concerns over infrastructure funding for AI projects in this high-rate climate.

Aneeka Gupta, Research Director at WisdomTree, remains cautious about the current rebound. She commented: "Last week’s shock was a panic rooted in financing, not demand. This explains why the rebound has some support yet still appears fragile."

Bloomberg macro strategist Skylar Montgomery Koning also noted that the real risk lies in contagion—AI’s importance to the broader economy means that financing stress could potentially evolve into a wider growth issue, as was apparent during last week’s risk-off flows. For now, she says, stock market weakness remains largely concentrated in AI-related financing trades, and investors are mostly rotating internally rather than broadly reducing risk exposure.

This week’s earnings season will provide a fresh test for the AI investment narrative. Both Meta Platforms and Tesla will release quarterly results, and investors will focus on whether these companies can maintain rapid earnings growth and continue executing large-scale capital spending amid persistent increases in debt costs.

Morgan Stanley strategist Michael Wilson said corrections in some corners of the stock market were nearing an end, and investors should prepare to increase risk exposure. In a note to clients, he wrote: "We recommend investors prepare for two scenarios—either a very swift recovery or a drawn-out process extending into November. In our view, then is the time to add risk rather than avoid it."

Wilson also noted that the outperformance of so-called "high-quality" stocks versus the weak trend in equal-weighted S&P 500 is likely to fade, creating opportunities to buy the dip.

The situation in France has become an additional source of pressure for European markets this week. Over the weekend, violent incidents targeted public buildings, stores, and restaurants, as social discontent driven by cost-of-living pressures continued to mount.

Citigroup’s Head of European Equity Strategy, Beata Manthey, warned that volatility in French equities may persist until after Europe’s winter and the next presidential election, with future trends partly dependent on whether parliament has enough political energy to push through debt reform. She stated: "A lot of negative news is already priced in, but the market will likely remain volatile."

The French government’s room for maneuver is very limited—the country is saddled with heavy debt and one of the highest fiscal deficits in the eurozone, making it difficult to respond to social demands by boosting spending. The widening of spreads between French government bonds and German bunds further reflects markets’ doubts about France’s fiscal sustainability.

Oil Pulls Back From Highs, Safe-Haven Assets Gain