By Lisa Pauline Mattackal and Purvi Agarwal
(Reuters) -The S&P 500 and the Nasdaq rebounded on Monday, recovering some losses as Tesla (NASDAQ:TSLA) jumped on the prospect of favorable policy changes from the incoming Trump administration and investors awaited quarterly results from AI leader Nvidia.
Earnings from Nvidia, which reports third-quarter earnings on Wednesday, will be crucial as investors assess if the euphoria around AI, which drove much of markets' rally this year, can be sustained.
The chip designer, which powered 20% of the S&P 500's return over the past year, is expected to drive nearly 25% of its EPS growth in the third quarter, according to BofA Global Research. Nvidia's shares dipped 1.5% after a report said its new AI chips were overheating in servers.
"What we got last week was a hangover from the post-election rally. We've been able to rally back a little (after the selloff), but it's kind of slow," said Jay Woods, chief global strategist, Freedom Capital Markets.
"If we see anything that leads to downward pressure pricewise (from Nvidia), it could drag the whole Semiconductor index and that doesn't bode well," Woods said.
Consumer Discretionary stocks gained 1.2% after Tesla jumped 6.5% following a report that members of President-elect Donald Trump's transition team were seeking to ease U.S. rules for self-driving cars.
Shares of Uber and Lyft (NASDAQ:LYFT) fell 7% and 4%, respectively.
Information Technology stocks were up 0.2%, buoyed by Microsoft (NASDAQ:MSFT), which edged up 0.2%, and Apple (NASDAQ:AAPL), which rose 1.5%. Gains in these stocks also boosted the Nasdaq.
The Dow Jones Industrial Average fell 14.27 points, or 0.03%, to 43,430.72, the S&P 500 rose 24.57 points, or 0.43%, to 5,895.64 and the Nasdaq Composite gained 124.83 points, or 0.67%, to 18,805.96.
Rising expectations that the Federal Reserve will slow the pace of policy easing and uncertainty over the impact of Trump's cabinet appointments led to the S&P 500 and the Nasdaq logging their worst weekly losses in more than two months last week.
With the key holiday shopping season set to commence, results from major retailers including Walmart (NYSE:WMT), Lowe's Companies (NYSE:LOW) and Target (NYSE:TGT) will be closely watched this week to gauge the strength of the U.S. consumer.
Stock indexes have shed some of the sharp gains that followed Trump's decisive victory, but Wall Street remains fairly well placed as 2024 winds down. The benchmark index has gained about 23% year-to-date.
The NAHB Housing Market index rose to 46, beating an estimate of 43, while an index of housing stocks edged 0.2% higher on the day.
Traders are pricing in a 41.3% chance the Fed will keep interest rates on hold in December, according to the CME's FedWatch.
CVS Health (NYSE:CVS)'s shares gained 5.5% after the health insurer said it would add four new members to its board in an agreement with Glenview Capital Management.
Advancing issues outnumbered decliners by a 2.17-to-1 ratio on the NYSE, and by a 1.28-to-1 ratio on the Nasdaq.
The S&P 500 posted 24 new 52-week highs and 12 new lows, while the Nasdaq Composite recorded 49 new highs and 202 new lows.