U.S. stocks held onto their gains at midday on Monday, August 4, with the Nasdaq Composite rising 2% and the Dow Jones Industrial Average climbing over 500 points. The market was reacting to the latest diplomatic shift from the U.S., as President Donald Trump announced the cancellation of a planned strike on Iran, and peace talks are set to resume on Monday afternoon. Oil prices dropped sharply.

The Dow Jones Industrial Average gained 517.96 points, or 0.99%, to 53,002.99. The Nasdaq Composite advanced 500.51 points, or 1.97%, to 25,874.37. The S&P 500 rose 95.05 points, or 1.27%, to 7,584.77.

Crude oil prices fell on Monday after President Trump said on Sunday he had scrapped a planned strike on Iran, adding that negotiations between the two nations would restart on Monday. This followed a report from Friday suggesting that Trump was preparing for another round of strikes as the prospects for a negotiated resolution to the conflict dimmed and energy prices surged. Tehran indicated progress in talks with Oman regarding the reopening of the Strait of Hormuz, though oil prices recovered some of their earlier losses after Iran's foreign ministry spokesperson stated the country is not currently negotiating with the U.S.

Meanwhile, key OPEC+ members announced they would increase daily production by about 188,000 barrels in September, marking the sixth consecutive month of output increases. This move is part of a phased exit from the 1.65 million barrels per day voluntary production cuts initially agreed upon in 2023. On Monday morning, Brent crude fell 5.2% to $83.39 per barrel, while West Texas Intermediate crude futures dropped 6.2% to $79.45 per barrel.

U.S. Treasury yields also declined as inflation concerns eased slightly. The benchmark 10-year yield fell 6 basis points to 4.68%. Despite these gains, Adam Crisafulli, founder of Vital Knowledge, noted that investors are remaining cautious, as "we've been here before," and the conflict could still be a long way from a resolution—if it can be reached at all.

Chipmaker and mega-cap technology stocks were broadly higher. Bristol-Myers Squibb is reportedly in merger talks with AstraZeneca. Palantir Technologies is set to report earnings after the closing bell, followed by SpaceX's first earnings release as a public company on Tuesday. Monday marked the first trading day of August, as major indexes sought stability after a volatile July.

Investors are also bracing for a busy week of labor market data, culminating in the much-anticipated July nonfarm payrolls and unemployment rate report on Friday. According to a FactSet consensus estimate, the U.S. economy is expected to add 87,500 nonfarm jobs in July, up from 57,000 in the prior month. The unemployment rate is also projected to tick slightly higher, rising from 4.2% to 4.3%.