The S&P 500 and Nasdaq 100 each closed at one-week highs on Friday, while the Dow Jones Industrial Average notched a new all-time high, as optimism over a potential US-Iran peace deal and a broad rally in artificial intelligence stocks drove markets higher. The S&P 500 ($SPX) gained 0.37%, the Dow ($DOWI) rose 0.58%, and the Nasdaq 100 ($IUXX) added 0.42%.
The advance was tempered late in the session after the University of Michigan’s May consumer sentiment index was revised downward to a record low of 44.8, the weakest reading since the survey began in 1978. Economists had expected the figure to hold at 48.2. The same report showed one-year inflation expectations rising to 4.8%, a nine-month high, and five-to-ten-year expectations climbing to 3.9%, a seven-month high.
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Federal Reserve Governor Christopher Waller added to the cautious tone, stating he supports making clear that the central bank’s next rate move could be an increase, as inflation is not moving in the right direction. Markets now price in a 0% chance of a rate cut at the Fed’s June 16-17 meeting.
Iran Negotiations Drive Energy Volatility
Crude oil prices swung sharply on Friday as traders weighed conflicting signals from the Middle East. A Reuters report that Qatar had sent a negotiating team to Tehran, coordinated with the US, briefly pushed WTI crude into negative territory for the session. Iran said the latest US proposal has narrowed the gaps between the two sides, while Secretary of State Marco Rubio acknowledged slight progress in talks.
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The Strait of Hormuz remains closed, and the International Energy Agency warned that global oil markets will remain severely undersupplied until at least October, even if the conflict ends next month. Goldman Sachs estimates the disruption has already drawn down nearly 500 million barrels from global crude stockpiles.
Chipmakers and Software Lead Sector Gains
Technology stocks powered the rally, with chipmakers posting outsized gains. Qualcomm (QCOM) surged more than 11% to lead the Nasdaq 100, while NXP Semiconductors (NXPI) gained over 5%. Advanced Micro Devices (AMD), Analog Devices (ADI), and Texas Instruments (TXN) each rose more than 3%.
Software stocks also performed well after Workday (WDAY) reported better-than-expected Q1 results. The company posted adjusted earnings of $2.66 per share, above the consensus estimate of $2.51, and issued Q2 subscription revenue guidance of $2.46 billion, slightly ahead of expectations. Workday shares closed up more than 5%. Atlassian (TEAM) and Intuit (INTU) each added more than 4%, while Salesforce (CRM) and ServiceNow (NOW) rose more than 2%.
Dell Technologies (DELL) jumped more than 16% after Wells Fargo Securities raised its price target to $270 from $180, citing AI server demand. IMAX Corp. (IMAX) gained more than 15% following a Wall Street Journal report that the company is exploring a sale.
Mixed Signals in Consumer and Earnings Data
Despite the downbeat consumer sentiment data, the broader earnings season has been supportive. Of the 475 S&P 500 companies that have reported Q1 results, 83% have beaten analyst estimates. Aggregate Q1 earnings are projected to rise 12% year-over-year, according to Bloomberg Intelligence. Excluding the technology sector, however, earnings growth falls to roughly 3%, the weakest in two years.
Ross Stores (ROST) rose more than 8% after reporting Q1 sales of $6.01 billion, well above the consensus of $5.61 billion. Merck & Co. (MRK) gained more than 5% after European regulators recommended approval of its Keytruda combination therapy for bladder cancer.
On the downside, Take-Two Interactive Software (TTWO) fell more than 4% after forecasting 2027 net bookings of $8.0 billion to $8.2 billion, far below the $9.11 billion consensus. Coinbase Global (COIN) also dropped more than 4% as Bitcoin fell to a three-week low.
Fixed Income and Global Markets
Treasury notes posted modest gains, with the 10-year yield falling 1.2 basis points to 4.558%. The 10-year breakeven inflation rate dropped to a one-month low of 2.401%, offering some support for bonds. However, gains were capped by Waller’s hawkish comments and the upward revision to inflation expectations.
European stocks closed higher, with the Euro Stoxx 50 rising 0.99% to a two-week high. Germany’s IFO business confidence index unexpectedly rose to 84.9, and the GfK consumer confidence index improved to -29.8, both beating expectations. In Asia, Japan’s Nikkei 225 jumped 2.68% to a one-week high, while China’s Shanghai Composite recovered from a three-week low to close up 0.87%.
