Wall Street's main indexes were mixed on Monday as investors prepared for a busy week and chip companies teetered after agreeing to share a portion of revenue from China sales with the U.S. under a trade policy shift from the Trump administration.
Semiconductor giant Nvidia (NVDA.O) and Advanced Micro Devices (AMD.O) wobbled in early trading and were last marginally higher after a U.S. official told Reuters the companies had agreed to give the United States government 15% of revenue from sales of their advanced computer chips to China.
Enabling semiconductor sales to China was an integral issue in the agreement Washington and Beijing signed earlier this year - which expires on Tuesday - and markets will keenly watch how the latest development impacts the relationship between the world's two largest economies.
"It's a good way for the United States government to increase its cash and income... but a lot of people are going to argue that this is the wrong way to go," said Robert Pavlik, senior portfolio manager at Dakota Wealth.
"The Chinese government will probably use it as a point to argue that they need different chips because these particular chips might be susceptible to be reviewed by the Americans."
Markets also sought clarity on the sector tariffs U.S. President Donald Trump had announced.
At 09:52 a.m. ET, the Dow Jones Industrial Average (.DJI) fell 63.86 points, or 0.14%, to 44,109.53, the S&P 500 (.SPX) gained 0.84 points, or 0.01%, to 6,390.29, and the Nasdaq Composite (.IXIC) added 1.42 points, or 0.01%, to 21,451.44.
Seven of the 11 major S&P 500 sectors slipped, while healthcare (.SPXHC) gained 0.6%, recovering some of the 5% declines it had logged so far this year.
Traders took a step back after last week's rally helped the S&P 500 (.SPX) and the Nasdaq (.IXIC) log their strongest weekly performance in more than a month.
Investors expect that the recent shakeup at the U.S. Federal Reserve and signs of labor market weakness could nudge the central bank into adopting a dovish monetary policy stance later this year, fueling much of the optimism.
July's consumer inflation report is due on Tuesday and investors currently anticipate the Fed will lower borrowing costs by about 60 basis points by December, according to data compiled by LSEG.
A better-than-feared earnings season brought some relief, with BofA's monthly fund manager survey showing that buying megacap stocks was again the most popular trade. Citigroup and UBS Global Research became the latest brokerages to raise their year-end targets for the benchmark S&P 500.
In earnings, Micron (MU.O) raised its forecast for fourth-quarter revenue and adjusted profit, sending its shares up 3.4%. The broader chips index (.SOX) added 1%.
Intel (INTC.O) was up 4.9% after a report said CEO Lip-Bu Tan was expected to visit the White House. Trump had called for his removal last week.
Trump is expected to meet Russia's President Vladimir Putin on Friday to try and negotiate an end to the war on Ukraine.
Advancing issues outnumbered decliners by a 1.42-to-1 ratio on the NYSE and by a 1.33-to-1 ratio on the Nasdaq.
The S&P 500 posted 11 new 52-week highs and nine new lows, while the Nasdaq Composite recorded 48 new highs and 41 new lows.
