S&P 500 and Nasdaq Hit Record Highs Amid Strong AI Stock Gains

Record Highs for Major Indices

On Friday, the S&P 500 and Nasdaq indices registered new all-time highs, buoyed by significant gains in stocks associated with artificial intelligence, including Nvidia and Sandisk. Nvidia’s shares rose by 1.8%, while both Micron Technology and Sandisk saw their stocks surge by over 15%, driven by robust demand stemming from the rapid expansion of AI data centers.

The Philadelphia Semiconductor Index also experienced a notable increase, with gains of 55% since the beginning of the second quarter. Both the S&P 500 and Nasdaq have been on an upward trajectory this week, reflecting strong earnings reports from American companies, despite concerns regarding rising oil prices linked to ongoing tensions in the Middle East.

According to LSEG data, S&P 500 companies are projected to report a year-on-year earnings growth of approximately 29% for the first quarter, significantly driven by major AI firms on Wall Street. Rob Williams, Chief Investment Strategist at Sage Advisory Services in Austin, commented, ‘This economy seems hard to undermine. It’s a story of productivity, spending, and the wealth effect on consumer and corporate earnings.’

Positive Employment Data Supports Market Confidence

Recent economic data revealed that employment in the United States increased more than expected in April, with the unemployment rate holding steady at 4.3%. This bolstered expectations that the Federal Reserve would maintain interest rates unchanged for the foreseeable future. Market participants anticipate that the central bank will keep rates within the 3.50% to 3.75% range until the end of the year.

The S&P 500 closed up 0.84% at 7398.93 points, while the Nasdaq jumped 1.71% to 26247.08 points. The Dow Jones Industrial Average saw a modest increase of 0.02%, closing at 49609.16 points. The technology sector within the S&P 500 rose by 2.7%, contrasting with a 0.9% decline in the utilities sector.

Both the S&P 500 and Nasdaq marked their sixth consecutive week of gains, the longest weekly winning streak since October 2024, while the Dow Jones recorded its second consecutive weekly gain. Year-to-date, the S&P 500 has risen by 8%, and the Nasdaq has climbed 13%. Investor optimism regarding corporate earnings has allowed them to overlook renewed hostilities between U.S. and Iranian forces in the Gulf.

Market Reactions to Geopolitical Tensions

In the commodities market, Brent crude oil prices surged above $100 per barrel as hopes for a swift resolution to the Middle Eastern conflict diminished, impacting the vital Strait of Hormuz, a key transit route for oil and liquefied natural gas. The U.S. has indicated it expects a response from Tehran regarding its latest proposals later on Friday.

Among the 440 companies in the S&P 500 that have reported their results so far, over 83% have exceeded earnings expectations, compared to a long-term historical average of about 67%. However, some firms have reported disappointing results, including Cloudflare, which saw its stock plummet by 24% after announcing a 20% reduction in its workforce and projecting slightly lower revenues for the second quarter than market estimates.

Other notable declines included Trade Desk, which fell by 1.8% following weak revenue forecasts, and Core Weave, down 11.4% due to increased capital expenditure expectations. Expedia, the online travel platform, dropped 9% after warning that the conflict in the Middle East was negatively impacting demand.

Frequently Asked Questions

What drove the recent gains in the S&P 500 and Nasdaq?

Gains were driven by strong performances in AI-related stocks and robust US job data.

How have geopolitical tensions affected the markets?

Investor optimism has allowed markets to overlook renewed hostilities, although oil prices have surged.

What are the earnings projections for S&P 500 companies?

Earnings are expected to grow approximately 29% year-on-year for the first quarter.

What is the current unemployment rate in the US?

The unemployment rate in the US remains steady at 4.3%.

What is the outlook for interest rates according to market participants?

Market participants expect the Federal Reserve to maintain interest rates between 3.50% and 3.75% until the end of the year.