US Equities Hit Record Highs as Geopolitical Easing and AI Demand Fuel Rally
The S&P 500, Dow Jones, and Nasdaq 100 all closed at new all-time highs on Friday, buoyed by strong corporate earnings, robust economic data, and optimism surrounding a potential Middle East truce.
US stock indexes closed at new all-time highs on Friday, driven by a combination of easing geopolitical tensions and relentless demand for artificial intelligence infrastructure. The S&P 500 rose 0.22%, the Dow Jones Industrial Average gained 0.72%, and the Nasdaq 100 increased 0.36%. June E-mini S&P futures rose 0.19%, while June E-mini Nasdaq futures climbed 0.31%, indicating continued bullish sentiment into the next trading session.
The rally was underpinned by prospects of a Middle East ceasefire, which reduced inflation concerns and eased pressure on energy markets. Crude oil prices fell more than 1% to a five-week low as the US and Iran tentatively agreed to extend a ceasefire by 60 days. While optimism regarding the reopening of the Strait of Hormuz grew, significant hurdles remain, including the removal of mines in the waterway and the repair of damaged energy infrastructure.
Corporate earnings provided substantial support, particularly in the technology sector. Dell Technologies led S&P 500 gainers with a 32% surge after reporting first-quarter revenue of $43.84 billion, significantly above the consensus estimate of $35.52 billion. The company also raised its 2027 revenue forecast to between $165 billion and $169 billion. NetApp followed with a 22% gain after beating revenue estimates, while software and cybersecurity stocks rallied broadly, with Atlassian, ServiceNow, and IBM posting double-digit gains.
Economic data released on Friday reinforced the strength of the US economy. The May MNI Chicago PMI rose to 62.7, marking the strongest expansion in 4.25 years and well above expectations of 50.3. This robust data contributed to a mixed reaction from Federal Reserve officials. San Francisco Fed President Mary Daly and Minneapolis Fed President Neel Kashkari expressed caution regarding immediate rate hikes, citing the need to monitor data and geopolitical developments. Conversely, Kansas City Fed President Jeff Schmid warned that inflation remains above the 2% target, signalling a continued commitment to price stability.
Global markets and fixed income assets reflected the shifting sentiment. The Nikkei Stock Average rallied to a new record high, closing up 2.53%, while European indices remained mixed. In the bond market, US 10-year Treasury yields rose slightly to 4.449% as strong PMI data and record equity highs reduced safe-haven demand. European government bond yields fell, with the 10-year German Bund yield dropping 2.4 basis points. Meanwhile, the Q1 earnings season for S&P 500 companies is winding down with 84% of reporters beating estimates, projecting a 12% year-on-year earnings growth.
