US stocks gain after Friday sell-off, Mideast tensions subside

Some megacap growth stocks edged higher in early trading, with Meta Platforms, Amazon.com and Apple up between 0.6% and 1.5%.

Nvidia advanced 2.8%, rebounding from a 10% drop in the last session.

"The market got over-sold on Friday because of Netflix earnings, it was primarily a tech-driven decline," said Jay Hatfield, CEO and portfolio manager at InfraCap.

"We're headed into megacap earnings and so people are starting to realize that Netflix is not very indicative of what's going to happen with other megacap stocks."

Tesla, Meta Platforms, Alphabet and Microsoft will be in focus this week as the companies gear up to deliver their quarterly numbers, whose performance could further test the rally in U.S. stocks.

The risk-on mode was also supported by signs of easing tensions in the Middle East, as Iran's foreign minister said on Friday Tehran was investigating an overnight attack, adding that so far a link to Israel had not been proven as he downplayed the strike.

Equities have sold-off recently as market participants readjust their interest rate cut expectations from the U.S. Federal Reserve after a string of strong economic data signaling persistent inflationary pressures.

Money markets are now pricing in just about 38 basis points (bps) of rate cuts this year, down from about 150 bps seen at the beginning of the year, according to LSEG data.

On the docket this week would be the price consumption expenditure (PCE) index reading for March - the Fed's preferred inflation gauge - to further ascertain the monetary policy trajectory.

Fed policymakers were in a media blackout ahead of their latest policy meeting on May 1.

At 9:40 a.m. ET, the Industrial Average was up 44.85 points, or 0.12%, at 38,031.25, the S&P 500 was up 18.13 points, or 0.36%, at 4,985.36, and the Nasdaq Composite was up 109.81 points, or 0.72%, at 15,391.82.

Six of the 11 major S&P 500 sectors were trading higher, with communication services leading gains, up 0.9%.

Among single stocks, Tesla fell 3.7% as the electric vehicle maker cut prices in a number of its major markets, including China and Germany, following price reductions in the United States.

Salesforce rose 2.3% after the business software maker backed away from its talks to acquire data-management software firm Informatica after the two companies could not agree on terms.

Advancing issues outnumbered decliners by a 1.23-to-1 ratio on the NYSE and by a 1.17-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and two new lows, while the Nasdaq recorded 13 new highs and 55 new lows.