Weekly Market Update: Rally Extends to Six Weeks as Iran Talks Advance
Markets traded higher for a sixth consecutive week, extending the rally that began in late March and pushing several major indexes to new highs.
Technology and growth stocks led the advance, with the Nasdaq gaining nearly 4%, outpacing the S&P 500 and small-cap stocks, which each rose roughly 1.5%. Technology, consumer discretionary, and communication services were the top-performing sectors, all of which carry significant exposure to the largest companies in the market.
Beneath the surface, the picture was more mixed. Six of eleven sectors finished the week lower, highlighting how the rally has been driven by a relatively narrow group of market leaders. Bonds produced modest gains as interest rates drifted lower, and oil fell more than 8% on reports of progress toward an Iran deal.
The week closed with a stronger-than-expected April jobs report, adding to the picture of an economy that continues to hold up despite the geopolitical backdrop.
Key Takeaways
The Middle East Conflict, Now in its 10th Week, Remains the Top Story in Financial Markets
The week opened with Iran’s most serious provocation since the April ceasefire, including strikes on the UAE and attacks on commercial ships in the Strait of Hormuz. The tone shifted quickly as regional allies pressed for de-escalation and reports emerged of a framework agreement to end the conflict.
Oil fell nearly 10% early in the week, trading near $90 per barrel for the first time since mid-April.
Why it matters: The acute market stress from earlier in the conflict has eased, but the situation continues to drive significant swings in oil prices and broader market sentiment. Progress toward a resolution would be a positive development for markets, while a breakdown in talks could trigger more volatility.
Major U.S. Equity Indices Continue to Set New Highs
U.S. stocks extended their rally to six consecutive weeks, with three of the four major indexes reaching new highs. The S&P 500 gained 2.0%, the Nasdaq rose 4.0%, and small-cap stocks climbed 1.5% to set a new high of their own.
Most of the week’s gains came in a single session, following reports of progress on an Iran deal.
Why it matters: The pattern has been consistent through this stretch of geopolitical uncertainty. Headlines create short bursts of volatility, but the market has recovered as conditions stabilize. Six consecutive weeks of gains, including new highs across multiple broad equity indexes, reflects a market that continues to look through near-term uncertainty toward the underlying fundamentals.
Leading Tech Companies Report Strong Earnings and Increasing AI Capital Expenditures
The largest technology companies reported earnings over the past two weeks, and their commitment to AI infrastructure spending continues to grow. Alphabet, Amazon, Meta, and Microsoft all beat estimates, but the capital spending figures drew the most attention.
Meta raised its full-year capital spending guidance to $125 to $145 billion, Microsoft spent nearly $32 billion in a single quarter, and Alphabet’s cloud backlog nearly doubled. Combined, the top four U.S. cloud providers are now projected to spend over $660 billion on infrastructure in 2026.
Why it matters: The spending isn’t speculative in the way it once appeared, with the group posting strong revenue growth. Given these companies’ large index weights, the reported growth is one of the forces pushing broad market indexes higher.
April Payrolls Beat Expectations as the Labor Market Holds Steady
The April employment report came in stronger than expected. Nonfarm payrolls rose by 115,000, down from the 185,000 created in an unusually strong March but better than the 55,000 forecast in the Dow Jones consensus estimate.
The unemployment rate held at 4.3%, further proof that the labor market has reached a point where only modest job creation is needed to keep the jobless level steady, given little growth in the labor force. Average hourly earnings came in lower than expected, increasing 0.2% for the month and 3.6% on an annual basis.
Beneath the headline, the picture was softer. A broader measure that includes discouraged workers and those holding part-time jobs for economic reasons rose to 8.2%, and the participation rate declined to 61.8%, the lowest since October 2021.
Why it matters: The labor market continues to defy expectations for a slowdown, but the softer details, slower wage growth and falling participation, point to a more cautious picture underneath. For investors, the report supports the view of a stable but cooling labor market, one that doesn’t pressure the Fed in either direction at a time when policymakers are already navigating an oil shock and ongoing geopolitical risk.