Equities
U.S. equities extended their advance, with the Dow Jones +0.90%, S&P 500 +1.43%, Nasdaq +2.39%, and Russell 2000 +1.75%. The S&P 500 recorded its ninth consecutive weekly gain while the Nasdaq finished higher for the eighth week out of the last nine, with both indices closing at fresh record highs. Leadership remained concentrated in growth, momentum, and AI-linked exposures, as investors responded positively to easing geopolitical concerns, falling oil prices, lower yields, and another strong batch of technology earnings. Market breadth improved modestly, although performance remained heavily skewed toward large-cap growth and semiconductor-related beneficiaries.
Technology (+4.56%) was by far the strongest-performing sector, followed by consumer discretionary (+1.50%), materials (+1.20%), and industrials (+0.79%). Semiconductors continued to lead, with the Philadelphia Semiconductor Index (SOX) rising 5.1%, while memory stocks emerged as the week’s standout theme. Consumer staples (-3.24%), energy (-5.43%), utilities (-2.09%), real estate (-1.36%), financials (-0.70%), healthcare (-0.28%), and communication services (+0.02%) lagged as investors rotated away from defensive sectors. Outside technology, strength was also evident across software, internet companies, airlines, cruise operators, trucking, logistics, copper, aluminium, and homebuilders, with the Homebuilders ETF (XHB) gaining 2.6%.
A key driver of sentiment was growing optimism around a potential de-escalation between the U.S. and Iran. Reports indicated negotiators had reached a 60-day memorandum extending the ceasefire, although final approval from President Trump remains pending. Progress toward a resolution helped push crude oil prices lower, flatten the oil futures curve, and reduce inflation concerns. VIX volatility and inflation breakeven rates both fell below pre-conflict levels, supporting risk appetite. While April Core PCE at 3.3% y/y reinforced the view that inflation remains sticky, investors focused more on declining geopolitical risk and improving financial conditions. Markets now price approximately 12 bps of tightening through year-end, down from roughly 25 bps a week earlier, despite several Fed officials maintaining that additional hikes remain possible if inflation reaccelerates.
Momentum continued to dominate performance. The momentum factor (MTUM +4.0%) outperformed the S&P 500 for the fifth time in six weeks, highlighting continued concentration in leadership. Microsoft (+7.6%) was among the largest contributors to index gains, while AI enthusiasm remained a powerful tailwind across the semiconductor and infrastructure ecosystem. Micron (+29.3%) surged following stronger-than-expected memory pricing trends and became the latest company to surpass a $1T market capitalisation. Investors also focused on the broader AI ecosystem after Anthropic reportedly raised $65B at a $965B valuation and generated approximately $45B in annual recurring revenue, exceeding estimates for OpenAI. At the same time, concerns around rising AI infrastructure costs gained attention as enterprises increasingly monitor and manage token consumption, though there is little evidence yet that spending discipline is slowing AI adoption.
Corporate earnings reinforced the constructive AI narrative. Software results helped alleviate concerns surrounding a potential “SAASpocalypse,” with Snowflake (+48.4%) delivering one of the strongest earnings reactions of the year after forecasting 31% revenue growth driven by demand for AI-enabled data analytics. Dell (+42.6%) also surged after guiding fiscal-year revenue significantly above expectations on strength in AI-optimised server demand. Additional AI-related winners included NetApp (+25.1%), Dycom (+24.0%), and Marvell (+4.4%), reflecting continued investor confidence in the infrastructure buildout supporting generative AI deployment.
Elsewhere, Qualcomm (+5.4%) announced a new AI chip partnership with ByteDance, Ford (+16.8%) rallied on enthusiasm surrounding its battery strategy, and Modine (+7.1%) secured more than $4B of cooling-solution commitments from a major data-centre customer. Healthcare M&A remained active, with Eli Lilly (+3.8%) agreeing to acquire three vaccine companies for up to $3.8B. Caesars Entertainment (+2.0%) agreed to be acquired by Fertitta Entertainment for $31 per share, while IFF (+1.0%) announced the sale of its food ingredients business for approximately $3.8B.
Consumer-related earnings presented a more mixed picture. Positive surprises from Best Buy (+26.5%) and Kohl’s (+10.0%) suggested pockets of resilience remain, while weaker reactions in Gap (-9.6%) and American Eagle (-4.4%) highlighted ongoing pressure on lower-income consumers. Recent economic data also pointed to moderation in household spending, with real personal consumption growth slowing and the savings rate falling to its lowest level in four years. While the consumer remains supportive of overall economic growth, evidence of increasing strain continues to emerge beneath the surface.
Attention now shifts to a busy macroeconomic calendar that includes ISM Manufacturing, JOLTS job openings, ADP employment, ISM Services, and the May employment report. Consensus expects payroll growth to slow to approximately 100K, unemployment to remain at 4.3%, and wage growth to increase modestly to 0.3% m/m. Investors will also monitor the final stages of earnings season, with key reports from companies including Hewlett Packard Enterprise, Palo Alto Networks, Ulta Beauty, Medtronic, Broadcom, CrowdStrike, Veeva Systems and Lululemon Athletica. The combination of easing geopolitical tensions, continued AI-driven earnings strength, and still-supportive liquidity conditions remains constructive for equities, although leadership remains narrow and valuations increasingly depend on continued execution from the largest growth companies.