S&P 500 and Nasdaq Hit New Highs on AI and Earnings Momentum

Market Gains and Record Highs

On Friday, the S&P 500 and the Nasdaq reached record highs, driven by strong performances in AI-related stocks such as Nvidia and Sandisk. The gains were further supported by a stronger-than-expected jobs report that highlighted the resilience of the labor market.

Nvidia saw an increase of 1.8%, while memory and storage companies Micron Technology and Sandisk experienced gains of over 15% each. This surge was fueled by rising demand for AI data centers. The Philadelphia SE Semiconductor index also saw significant gains, with a 55% increase in the second quarter so far.

The S&P 500 and the Nasdaq have continued to climb to new heights this week, as investors focus on strong financial reports from U.S. companies. Concerns about high oil prices due to the Middle East conflict and its potential impact on inflation have been temporarily set aside.

First-quarter S&P 500 earnings are projected to rise nearly 29% year-over-year, with much of this growth attributed to Wall Street's AI-related heavyweights, according to LSEG I/B/E/S. Rob Williams, chief investment strategist at Sage Advisory Services in Austin, Texas, noted, "This is an economy that seems hard to wreck. It's the productivity story, the spending, the consumer wealth effect and the earnings."

Employment Data and Federal Reserve Outlook

U.S. employment data for April showed an increase that exceeded expectations, with the unemployment rate remaining steady at 4.3%. This reinforced the belief that the Federal Reserve will keep interest rates unchanged for the foreseeable future. Traders anticipate that the central bank will maintain rates within the 3.50% to 3.75% range through the end of the year.

On the day, the S&P 500 closed up 0.84% at 7,398.93 points, while the Nasdaq gained 1.71% to 26,247.08 points. The Dow Jones Industrial Average rose slightly by 0.02% to 49,609.16 points.

The S&P 500 technology index climbed 2.7%, while the utilities sector index declined by 0.9%. Both the S&P 500 and the Nasdaq achieved their sixth consecutive weekly gains, marking the longest winning streak since October 2024. The Dow has seen two weeks of consecutive advances.

Earnings Optimism and Market Volatility

The S&P 500 has gained 8% in 2026, while the Nasdaq has surged 13%. This optimism around earnings helped investors overlook recent attacks between U.S. and Iranian forces in the Gulf.

Brent crude surpassed $100 per barrel as hopes for a swift resolution to the Middle East conflict diminished. The gradual reopening of the Strait of Hormuz, a crucial route for oil and liquefied natural gas, remains uncertain.

The U.S. expects a response from Tehran to its latest proposal later in the day. Among the 440 S&P 500 companies that have reported first-quarter results, 83% have exceeded analysts' earnings estimates, compared to a long-term average of approximately 67%.

However, some companies have faced earnings disappointments. Cloudflare dropped 24% after announcing plans to cut about 20% of its workforce and forecast lower-than-expected second-quarter revenue. Trade Desk fell 1.8% following similar concerns about its second-quarter revenue. CoreWeave declined 11.4% after adjusting its annual capital expenditure forecast upward due to increased component costs. Expedia fell 9% as it cited the Middle East conflict as a factor affecting demand.

Market Activity and Volume

Within the S&P 500, declining stocks outnumbered rising ones by a ratio of 1.4 to 1. The index recorded 28 new highs and 30 new lows, while the Nasdaq saw 134 new highs and 119 new lows.

Trading volume on U.S. exchanges was relatively light, with 17.2 billion shares traded, compared to an average of 17.6 billion shares over the previous 20 sessions.