U.S. stock indexes closed higher on Friday, with the S&P 500 and Nasdaq 100 reaching new all-time highs, as stronger-than-expected corporate earnings and a resilient labor market outweighed escalating geopolitical tensions in the Middle East. The S&P 500 rose 0.84%, the Dow Jones Industrial Average edged up 0.02%, and the Nasdaq 100 surged 2.35%, led by a broad rally in chipmaker and AI-infrastructure stocks.
Labor Market Strength Supports Market Sentiment
The April nonfarm payrolls report showed the U.S. economy added 115,000 jobs, significantly above the consensus estimate of 65,000. March payrolls were also revised upward to 185,000 from the previously reported 178,000. The unemployment rate held steady at 4.3%, in line with expectations. Average hourly earnings rose 0.2% month-over-month and 3.6% year-over-year, slightly below forecasts, suggesting wage pressures remain contained — a factor that bond markets interpreted as supportive for fixed-income securities.
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Despite the positive labor data, the University of Michigan’s May consumer sentiment index fell to a record low of 48.2, below the expected 49.5. However, inflation expectations unexpectedly eased, with one-year expectations dropping to 4.5% from 4.7% and five-to-ten-year expectations slipping to 3.4% from 3.5%. This provided additional support for Treasuries, with the 10-year yield falling 2.1 basis points to 4.365%.
Geopolitical Tensions in the Strait of Hormuz
Geopolitical risks remained elevated after Iran seized an oil tanker in the Strait of Hormuz on Friday, according to Iran’s semi-official Tasnim news agency, which cited “attempting to disrupt oil exports and the interests of the Iranian nation.” In response, U.S. forces targeted missile and drone launch sites in Iran responsible for attacks on three U.S. Navy destroyers transiting the strait. President Trump has threatened intense strikes if Iran refuses a proposed deal to reopen the strait, which remains essentially closed. Goldman Sachs estimates the disruption has drawn down nearly 500 million barrels from global crude stockpiles, with the drawdown potentially reaching 1 billion barrels by June.
WTI crude oil prices moved higher on the news, adding to inflationary concerns that are being closely watched by central banks globally. The European Central Bank is now pricing in a 79% chance of a 25-basis-point rate hike at its June meeting, with ECB Vice President Luis de Guindos noting that the reopening of the Strait of Hormuz will be a key determinant for the decision.
Chipmaker and AI Stocks Lead the Rally
The technology sector was the standout performer, with chipmaker and AI-infrastructure stocks driving the Nasdaq 100 to its record close. Sandisk surged more than 15%, Micron Technology gained over 14%, Intel rose more than 13%, and Advanced Micro Devices climbed over 10%. Qualcomm, Applied Materials, KLA Corp, and Marvell Technology each rose more than 5%, while ASML Holding, Lam Research, Broadcom, and Western Digital added over 2%.
Mining stocks also rallied as gold, silver, and copper prices moved higher. Anglogold Ashanti closed up more than 7%, while Southern Copper and Barrick Mining gained over 3%. Coeur Mining, Hecla Mining, Newmont Corp, and Freeport McMoRan also posted gains.
On the downside, software stocks weighed on the Dow, with Salesforce, Autodesk, Workday, ServiceNow, and Intuit each falling more than 2%. Adobe and Microsoft declined over 1%.
Earnings Season Continues to Support Sentiment
With 83% of the 446 S&P 500 companies that have reported Q1 earnings beating estimates, the earnings season remains a key driver of market optimism. Q1 S&P 500 earnings are projected to climb 12% year-over-year, according to Bloomberg Intelligence. However, stripping out the technology sector, earnings growth is estimated at just 3% — the weakest in two years.
Notable movers on Friday included Akamai Technologies, which surged over 26% after raising its full-year revenue forecast and announcing a $1.8 billion AI cloud contract. Monster Beverage gained over 13% on better-than-expected Q1 sales, while Corpay rose over 12% after raising its revenue outlook. Iren Ltd climbed over 8% after signing a $3.4 billion AI Cloud contract with Nvidia. Block rose over 7% on stronger-than-expected earnings and an upward profit revision.
On the losing side, Cloudflare fell over 23% after issuing a weaker-than-expected Q2 revenue forecast. HubSpot dropped over 18% on a similar outlook, and Mettler-Toledo International fell over 14% after forecasting Q2 adjusted EPS below consensus. MercadoLibre declined over 12% on weaker-than-expected Q1 earnings.
Outlook and Key Risks
The markets are currently discounting only a 6% chance of a 25-basis-point rate cut at the Federal Reserve’s next meeting on June 16-17, reflecting the central bank’s focus on inflation. The combination of a resilient labor market, solid earnings, and geopolitical risks creates a complex environment for investors. The reopening of the Strait of Hormuz remains a critical variable, with potential implications for global energy prices, inflation, and monetary policy.
Investors should monitor upcoming earnings reports from major companies including AECOM, Constellation Energy, Fox Corp, and Simon Property Group, scheduled for release on May 11.
Conclusion
Friday’s market action reflected a tug-of-war between positive fundamentals — strong earnings and a resilient labor market — and significant geopolitical risks. The record highs in the S&P 500 and Nasdaq 100 underscore the market’s ability to look past near-term uncertainties, but the situation in the Middle East and its impact on energy prices and central bank policy will remain key themes in the weeks ahead.
FAQs
Q1: What drove the stock market rally on Friday?
The rally was driven by stronger-than-expected corporate earnings, a resilient April jobs report showing 115,000 new nonfarm payrolls, and gains in chipmaker and AI-infrastructure stocks, which offset concerns about geopolitical tensions in the Middle East.
Q2: How did the labor market data affect market expectations for Fed policy?
The stronger-than-expected payrolls data reduced expectations for near-term rate cuts. Markets now see only a 6% chance of a 25-basis-point cut at the Fed’s June meeting, as the labor market remains tight and inflation concerns persist.
Q3: What is the significance of the Strait of Hormuz situation for investors?
The Strait of Hormuz is a critical chokepoint for global oil and LNG shipments. The current disruption has drawn down nearly 500 million barrels from global crude stockpiles, and a prolonged closure could push oil prices higher, fueling inflation and potentially forcing central banks to tighten monetary policy further.
