Market Watch — Indices Rally as Inflation Pressures Mount

Market Watch

Key Movers and Market Sentiment

Market Watch

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What Analysts Are Saying

U.S. equity indices climbed to fresh records on Thursday as technology shares continued to attract institutional inflows, while oil prices held above $100 per barrel amid sustained geopolitical risk from the U.S.-Iran conflict. The S&P 500 closed at 7,474.67, up 0.44 percent, its sixth record close in seven sessions. The Nasdaq Composite rose 0.53 percent to 26,511.52, and the Russell 2000 added 0.71 percent, suggesting broadening market participation beyond megacap technology. The Dow Jones Industrial Average dipped 0.22 percent to 49,763.34, held back by energy and financial shares.

What’s Next for Investors

Nvidia remained the focal point of the technology rally, extending its year-to-date advance as investors digested the company’s projected market dominance in artificial-intelligence semiconductors. Cisco Systems gained 4.1 percent after raising its full-year revenue forecast, citing robust demand from hyperscaler customers expanding AI infrastructure. Micron Technology rose 2.8 percent on memory-chip demand linked to AI server builds. The Philadelphia Semiconductor Index (SOX) closed up 1.6 percent, bringing its year-to-date gain to 38 percent.

WTI crude oil topped $100 per barrel on Tuesday for the first time since March, settling at $102.18, while Brent crude climbed 3.4 percent to $107.77 per barrel. The move followed President Donald Trump’s rejection of Iran’s latest counteroffer to end the ongoing conflict, with Trump describing Tehran’s proposal as “garbage” and warning the ceasefire was on “life support.” Since the U.S.-led military operation against Iran began on February 28, both WTI and Brent are up more than 45 percent. The Strait of Hormuz — through which roughly 20 million barrels per day transit — remains effectively closed, creating what senior energy advisor Amos Hochstein described as a “no war, no oil, no straits” condition. Saudi Aramco CEO Amin Nasser warned that even if Hormuz reopens immediately, market rebalancing will take months, with full normalization unlikely before 2027.

Expectations that the Trump-Xi summit in Beijing this week could produce a diplomatic opening on Iran added a layer of uncertainty to oil markets. Admiral James Stavridis, former NATO Supreme Allied Commander, told CNBC the administration faces three options: walk away from the conflict, resume a massive bombing campaign, or reopen Hormuz “with force” — a course he characterised as most likely but requiring significant naval resources and an estimated cost of $1 billion per week. Citadel’s energy team noted oil could remain volatile in the $90-to-$120 range through the remainder of 2026 and into 2027 even under a best-case Hormuz reopening scenario.

Gold was quoted at $4,683.40 per troy ounce, up 0.31 percent on the session, as investors sought safe-haven exposure amid elevated geopolitical risk. The Dollar Index fell 0.35 percent to 99.81, pressured by expectations that a Trump-Xi trade agreement could reduce safe-haven demand for U.S. assets. Treasury yields were little changed; the 10-year note yield held at 4.62 percent as investors weighed resilient corporate earnings against a still-uncertain inflation outlook.

First-quarter earnings season has offered fundamental support. With 84 percent of S&P 500 companies having reported, 74 percent have exceeded analyst consensus estimates. Blended earnings growth for the quarter stands at 15.1 percent, up from the 13.1 percent forecast at the start of reporting season. Revenue growth of 8.4 percent year-over-year and a record net profit margin of 13.4 percent have given indices room to sustain elevated valuations. The forward price-to-earnings ratio of 20.9 remains above the five-year average of 19.9, but expanding earnings have so far justified the premium.

The Federal Reserve’s policy path continues to influence market psychology. Traders now price approximately 28 percent odds of a rate cut by year-end, little changed from a week ago, as core PCE inflation running above target and a tight labour market limit the Fed’s room to ease. Kevin Warsh, widely expected to succeed Chair Jerome Powell after Trump’s recent designation, is viewed by markets as more growth-oriented, which has supported equity multiples.

Next week brings April housing starts, building permits, and the Federal Open Market Committee’s minutes from the May 6-7 meeting, where markets will scrutinise language around the inflation outlook for signals on the rate path. With the Iran situation unresolved, oil markets likely to remain volatile, and the Xi meeting’s outcome still pending, investor caution is warranted. Broad diversification, measured exposure to energy equities, and careful monitoring of Hormuz developments remain the prudent course as second-quarter positioning continues.