The Nasdaq and S&P 500 closed higher Monday, recovering some losses as investors anticipate quarterly earnings from AI leader Nvidia, and Tesla jumped on the prospect of favorable policy changes from the incoming Trump administration.

Nvidia reports third-quarter earnings on Wednesday when investors will assess demand for chips and the sustainability of the AI euphoria that drove much of the market's rally this year.

The chip designer, which powered 20% of the S&P 500's return over the past year, is expected to drive nearly 25% of its EPS growth in the third quarter, according to BofA Global Research. Nvidia's shares were down after a report said its new AI chips were overheating in servers.

"While Nvidia is the last of the Magnificent Seven to report, you’ve seen a nice broadening in earnings and attention," said Carol Schleif, chief investment officer at BMO Family Office. "It'll be noteworthy, but it doesn’t feel like there's the same level of impetus around it as there was a quarter or two ago."

According to preliminary data, the S&P 500 gained 23.63 points, or 0.40%, to end at 5,894.06 points, while the Nasdaq Composite gained 112.31 points, or 0.61%, to 18,792.43. The Dow Jones Industrial Average fell 46.27 points, or 0.12%, to 43,398.72.

Energy stocks led the S&P with consumer discretionary also rising as Tesla jumped following a Bloomberg report that members of President-elect Donald Trump's transition team were seeking to ease U.S. rules for self-driving cars. Industrial stocks were the biggest sectoral decliner.

CVS Health's shares gained after the health insurer said it would add four new members to its board in an agreement with Glenview Capital Management.

"I think a lot of specific sectors could be pretty volatile until we get more verbiage out of Trump's new picks later this month," Schleif said.

Stock indexes have shed some of the sharp gains that followed Trump's decisive victory, but Wall Street remains fairly well-placed as 2024 winds down.

Rising expectations that the Federal Reserve will slow the pace of policy easing and uncertainty over the impact of Trump's cabinet appointments led to the S&P 500 and the Nasdaq logging their worst weekly losses in more than two months last week.

With the key holiday shopping season set to commence, results from major retailers including Walmart, Lowe's Companies and Target will be closely watched this week to gauge the strength of the U.S. consumer.