Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York on July 27, 2026.

Angela Weiss | Afp | Getty Images

The S&P 500 plunged into the red on Monday as chip stocks slid, even as the market positively reacted to a pause in fighting between the U.S. and Iran over the weekend.

The S&P 500 was last down 0.1%, while the Nasdaq Composite slipped 0.3%. The Dow Jones Industrial Average traded 191 points higher, or 0.4%.

Semiconductor stocks were down broadly. The VanEck Semiconductor ETF (SMH) traded more than 4% lower, adding to its Friday losses. AMD and Teradyne dropped about 8% each to lead the declines. Micron Technology shed roughly 5%.

However, cooling of tensions in the Middle East sent international benchmark Brent crude futures for September delivery down 6.8% to around $90.25 a barrel. U.S. West Texas Intermediate crude futures dropped 6.1% to $83.83 a barrel.

Tensions elsewhere mounted after Ukraine struck an Iranian commercial vessel in the Caspian Sea, which prompted Tehran to accuse Kyiv of a "hostile and criminal act."

The week ahead will have no shortage of challenges for the major averages. A succession of quarterly reports from Amazon, Apple, Meta Platforms and Microsoft will either soothe investor fears of rampant artificial intelligence spending, or add to them, after Alphabet's disappointing results in the last week. The results could directly affect semiconductor companies that are the chief beneficiaries of the AI spending spree.

"The biggest risk is the continuation of the spend," said Ken Mahoney, CEO of Mahoney Asset Management. "And then the problem is, if they do listen to shareholders and wind down a little bit of that spend, or reduce the growth of that spend, then the rest of the market is not going to like it."

"So there's like a seesaw factor," he said.

The Fed will make its latest decision on interest rates on Wednesday. The consensus view is that the central bank will hike rates in September, but markets are pricing in the meaningful possibility that the Fed will lift its benchmark borrowing rate a quarter percentage point as soon as this week, according to the CME FedWatch Tool.

U.S. equities are coming off yet another losing week, as a pullback in chip stocks and uncertainty over the war with Iran weighed on investors. On Friday, the S&P 500 and the Nasdaq slid 0.6% and 2.1%, respectively, posting back-to-back weekly losses. The Dow fell 0.4%, notching a third straight week of declines.