$107 Oil Hit Tech. The Dow Still Rose.

Wall Street opened the week with a sharp split. Brent crude jumped to $106.65. Chip stocks fell 2.7%. The Nasdaq dropped 0.44%. Yet the Dow gained 195.60 points. Microsoft rose 1.1% and moved back above a $4 trillion market value.

Meta jumped more than 3%. Energy stocks climbed 1.5%. And investors largely waited. Bank earnings start Tuesday. Inflation data follows. Monday did not break the market. It rotated it.

Monday, October 12

Monday came down to two forces. Oil rose. Tech weakened. Brent moved toward $107 after deadly attacks on Riyadh’s international airport raised fresh supply fears. That put inflation risk back in focus.

At the same time, semiconductor stocks sold off. The result was a clear rotation. Money moved out of chips. It moved into energy. It moved into staples. And it moved into selected large-cap names with strong cash flow. That is why the Nasdaq fell while the Dow rose.

Oil was the biggest macro move of the day. Brent surged 1.8% to $106.65. That pushed crude back toward the highs seen earlier this month. The move followed weekend attacks on Riyadh’s airport.

Fresh supply risk quickly returned to the market. At the same time, new Russian diesel exports and talk of a Russia-Ukraine halt on attacks against energy sites limited the move. That kept oil from running even higher. But $106.65 is still a problem. High crude lifts fuel costs. It lifts freight costs. It raises input costs. And it can keep inflation sticky. That matters heading into this week’s inflation reports.

Semiconductors took the hardest hit inside technology. The Philadelphia Semiconductor Index fell 2.7%. That pushed the index to a 3-week low. Chip stocks have been among the market’s biggest winners. That also makes them vulnerable.

Their prices already assume years of strong AI growth. When oil rises and inflation risk increases, investors start demanding more from those future profits. That pressure showed up fast Monday. The AI story did not disappear. The price investors were willing to pay for it fell.

Microsoft moved the other way. Shares gained 1.1%. That pushed the company’s market value back above $4 trillion for the first time in about a year. The move followed plans for a major deployment of Microsoft’s own AI chips.

That matters. AI is expensive to run. Chips are expensive. Data centers are expensive. Power is expensive. Companies that can control more of that cost may have an edge. Microsoft is trying to do exactly that. Investors rewarded it.

Meta also held up well. Shares gained more than 3%. That helped communication services finish higher even as the Nasdaq fell. The move is another sign that investors are becoming more selective inside tech.

They did not sell every AI name. They sold parts of the market with more valuation pressure. Microsoft rose. Meta rose. Chips fell. That is not a full rejection of AI. It is a more selective market.

The Dow gained 0.38%. The S&P 500 slipped just 0.06%. The Nasdaq fell 0.44%. That split tells the story. Monday was not a broad selloff. It was a rotation. Energy rose. Staples rose. Communication services rose. Technology fell.

The Dow held up because more of its companies sit outside the most expensive parts of the growth trade. Money moved. It did not leave the market.

Fed pricing moved slightly higher. Markets put the chance of another October hike near 22%. That was up from 17.7% Friday. The move was small. The direction still matters.

Oil is back above $106. Inflation remains above target. And Cleveland Fed President Beth Hammack said policy should become more restrictive relatively quickly. The market still expects a pause this month. But the Fed is not declaring victory.

Monday came with one unusual limitation. The U.S. Treasury market was closed for Columbus Day. That removed one of the biggest daily signals from the market. Stocks reacted to oil. Stocks reacted to earnings expectations.

Stocks reacted to company news. But investors did not get a fresh Treasury close. That makes Tuesday more important. The bond market reopens. Bank earnings begin. And investors get a clearer look at how rates respond to $107 oil.

The large banks begin reporting Tuesday. JPMorgan. Goldman Sachs. Citigroup. Wells Fargo. The market will be watching several things. Trading revenue. Net interest income. Loan demand. Credit losses. Those numbers matter because higher rates cut both ways. They can help bank margins. They can also put more pressure on borrowers. This earnings season will show which force is winning.

Inflation data is the other major test this week. Consumer prices will give the Fed another look at how sticky inflation remains. That report matters more after Monday’s oil move. A hotter number would put more pressure on bonds and growth stocks. A softer number could calm rate fears. Stocks are still close to records. That leaves little room for a major inflation surprise.

There is another risk under the surface. The S&P 500 is up about 14% this year. But more than 40% of its members are still down. The median S&P stock is up only about 4%. That tells us how much of the rally still depends on a smaller group of winners. AI. Chips. Mega-cap tech. Energy. A narrow rally can keep rising. But it becomes more fragile when the leaders stumble. Monday’s 2.7% drop in chips was another reminder.

Monday left markets with a short list of hard numbers:

Monday did not break the market. It split it. Oil jumped toward $107. Chips fell 2.7%. Microsoft crossed $4 trillion. Meta rallied. Energy won. The Dow rose. The Nasdaq fell. Now the market gets the real test. Bank earnings start. Inflation data follows. And the bond market reopens. $107 oil hit tech. The Dow held. Now earnings and inflation decide the next move.