So, about that geopolitical premium in oil prices. It just got unwound in a hurry.

U.S. stocks kicked off August with a broad relief rally on Monday, and the catalyst was simple: President Donald Trump called off a planned military strike on Iran over the weekend and said negotiations would resume. The market took that as a sign that the Middle East might not turn into a full-blown conflict, and it responded accordingly.

West Texas Intermediate crude sank 5.9% to $79.69 a barrel, hitting a three-week low. That's a big chunk of the geopolitical risk premium that had built up over the past month, just evaporating. Brent, the international benchmark, slid 4.7% to $83.78.

And here's the thing about oil prices: they don't just affect what you pay at the pump. They ripple through the entire economy, and on Monday, that ripple was felt most directly in the bond market.

The 10-year Treasury yield fell 5 basis points to 4.69%, retreating from an 18-month high. The 2-year eased 4 basis points to 4.27%, and the 30-year dropped 5 basis points to 5.23%. When energy prices fall, the inflation impulse fades, and that changes the calculus for the Federal Reserve.

Speaking of which, rate-hike bets cooled off. Futures now imply roughly a 63% probability of a 25-basis-point Fed hike in September, down from about 80% before last week's policy meeting. That meeting was notable for three dissenting officials and a Chair Kevin Warsh who offered little in the way of forward guidance. Apparently, the market has decided that softer oil prices give the Fed less reason to tighten.

But oil wasn't the only tailwind. The ISM Manufacturing PMI jumped to 55.6 in July from 53.3, well above the 54.0 consensus. That's the strongest factory expansion since May 2022, and the employment index returned to expansion at 52.8. So you had a double dose of good news: geopolitical tensions easing and the economy humming along.

The result was a broad-based rally. The S&P 500 rose 1.3% to 7,584, while the Dow Jones Industrial Average advanced 520 points, or 1.0%, to 53,005. The Nasdaq 100 climbed 1.3% to 28,645, and the Russell 2000 outperformed, up 1.5% to 2,976. Small caps, which had been lagging, finally got a bid.

Monday's Performance In Major US Indices

If you're tracking the ETFs, here's how they looked at midday:

• The Vanguard S&P 500 ETF VOO gained 1.2%.
• The SPDR Dow Jones Industrial Average ETF Trust DIA rose 1.0%.
• The Invesco QQQ Trust QQQ climbed 1.4%.
• The iShares Russell 2000 ETF IWM rallied 1.5%.

Airlines Fly As Cheap Crude Punishes Energy

Now, let's talk about the winners and losers. The Communication Services Select Sector SPDR Fund XLC led all 11 S&P 500 sectors with a 3.1% gain. That was powered by Meta Platforms Inc. Meta Platforms (META), up 6.5%, and Alphabet Inc. Alphabet (GOOGL), up 4.1%. Big tech was having a good day.

On the flip side, the Energy Select Sector SPDR Fund XLE was the worst performer, down 0.8% as crude tumbled. That makes sense. When oil drops 6%, energy stocks feel it.

Elsewhere, the Consumer Discretionary Select Sector SPDR Fund XLY added 1.8%, while the Industrials Select Sector SPDR Fund XLI and the Technology Select Sector SPDR Fund XLK each rose about 1.1%.

At the industry level, the story was all about jet fuel. The U.S. Global Jets ETF JETS jumped 3.5%, the best industry move of the session. Lower fuel costs are a direct boost to airlines' bottom lines. The Invesco Solar ETF TAN also had a good day, rising 3.4%.

But the biggest single-stock story was in pharma. Bristol-Myers Squibb Co. Bristol-Myers Squibb (BMY) surged nearly 10% on reports it is in merger talks with AstraZeneca. That's a big deal, and the market clearly liked the idea.

Leading the Russell 1000 was CoreWeave Inc. CoreWeave (CRWV), up 15.4%. That's a big move for an AI cloud infrastructure company that had been in the doghouse. It looks like a broad risk-on bid for AI infrastructure after a 16% drawdown in July. Snowflake Inc. Snowflake (SNOW) was up 7.4%, and IREN Ltd. IREN was up 6.8%. So the AI trade is back, at least for today.

First Solar Inc. First Solar (FSLR) jumped 12.9% after Wells Fargo raised its price target to $320 from $255 and reiterated an Overweight rating. The catalyst? Potential upside from a Section 232 polysilicon tariff decision expected by early August. That's a specific policy catalyst, and the market is betting it goes in First Solar's favor.

The optics complex was also having a moment. Applied Optoelectronics Inc. Applied Optoelectronics (AAOI) rose 12.6%, alongside Coherent Corp. Coherent (COHR), up 9.4%, and Lumentum Holdings Inc. Lumentum (LITE), up 6.7%. When the AI trade comes back, optics tend to ride along.

Almonty Industries Inc. Almonty Industries (ALM) gained 10.6% after DA Davidson raised its price target on a stronger tungsten price outlook. Tungsten is trading at record levels above $3,200 per metric ton unit, and that's a nice tailwind for the company.

CNH Industrial N.V. CNH Industrial (CNH) rounded out the top five with a 10.2% advance. The company reported Q2 adjusted EPS of $0.13 versus an 11-cent consensus, on revenue of $4.80 billion, and raised full-year adjusted EPS guidance with a midpoint above estimates. Solid beat, solid guidance, solid pop.

The Worst Performer?

Now, for the other side of the ledger. The worst performer in the Russell 1000 was GameStop Corp. GameStop (GME), down 12.8% to its lowest level since August 2024. The video game retailer said it would privately exchange about $1.4 billion of convertible senior notes—roughly $400 million of 2030 notes and $1.0 billion of 2032 notes—for Class A common stock. It's a debt-reduction move, but investors read it as straight dilution. More shares outstanding, same value. That's a tough sell.

Marriott International Inc. Marriott (MAR) slid 7.4% on a mixed print. The market wasn't impressed.

Fair Isaac Corporation Fair Isaac (FICO) fell 7.2%, extending last week's roughly 17% post-earnings collapse on reported insider selling. When insiders sell, investors get nervous.

E-commerce website eBay Inc. eBay (EBAY) fell 4.7% after Wells Fargo cut the stock to Underweight from Equal Weight. The concern? The Depop acquisition could pressure fiscal 2027 earnings and force heavier marketing spend against resale rival Vinted. That's a longer-term worry, but the market is pricing it in now.

And Monolithic Power Systems, Inc. Monolithic Power Systems (MPWR) was down 4.99%, though no specific catalyst was mentioned in the article. Sometimes stocks just go down.

Monday's Russell 1000 Top Gainers

Monday's Russell 1000 Top Losers

So there you have it. A day where geopolitics took a back seat, oil prices fell, and the market threw a party. Whether it lasts is another question, but for now, investors are breathing a sigh of relief.