The Dow Jones Industrial Average closed at a record high Monday as optimism around U.S.-Iran talks lifted sentiment, though the session's sector rotation told a more complicated story.

Communication services leads, energy lags

Communication services climbed more than 4 percent, the best of the 11 major S&P sectors, driven by Meta Platforms and Alphabet. Energy dropped more than 1 percent as the worst performer. Art Hogan, chief market strategist at B. Riley Wealth, said the market's daily focus remains the price of oil and the 10-year yield.

Earnings backdrop remains strong

Through Friday, 304 S&P 500 companies had reported quarterly results showing a 29.3 percent earnings growth rate, with 85.2 percent topping analyst estimates, according to LSEG data. Amazon's market capitalization surpassed $3 trillion for the first time after its earnings last week.

SpaceX tests public markets

SpaceX, which went public in mid-June, will report its first quarterly results Tuesday. The stock has traded below its $135 issue price for nearly three weeks.

July's macro overhang

Stocks struggled in July amid concerns about the AI trajectory, the U.S.-Iran conflict and the Federal Reserve's rate path. Art Hogan, chief market strategist at B. Riley Wealth, said the market's daily focus remains the price of oil and the 10-year yield.

Merger talk and a profit warning

Bristol Myers Squibb shares were little changed on a report of preliminary merger talks with AstraZeneca that could create a drugmaker worth nearly $400 billion. Marriott International slumped after forecasting third-quarter profit below expectations.

Fed watch

New York Fed President John Williams expressed optimism that inflation pressures would ease gradually. A report last week that Fed Chair Kevin Warsh raised the idea of fewer rate-setting meetings added to concerns about policy clarity. Markets price a 66.5 percent chance of at least a 25-basis-point rate hike at the September meeting, according to CME Fedwatch. Labor market readings this week culminate in Friday's jobs report.