NEW YORK, May 11 (Reuters) – The S&P 500 closed slightly higher on Monday as AI optimism fueled the rally, even as the recent earnings-driven bull market frenzy subsided late in earnings season as oil prices rose amid stalled U.S.-Iran peace talks and fueled inflation concerns.
Semiconductors handily outperformed other sectors, with chipmakers outperforming the overall market as artificial intelligence-related momentum continues unabated.
“The semiconductor and AI infrastructure trade is completely on its own,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky. “And there’s so much momentum and pursuit to get some of these names that it almost seems like it’s staying away from anything like headlines or announcements.”
The first quarter reporting period is nearing its end, with 440 companies in the S&P 500 having reported. Of these, 83% exceeded profit expectations, according to LSEG IBES.
As of Friday, analysts collectively expected S&P 500 earnings to grow 28.6% year-over-year in the first quarter. This is nearly double the expected first-quarter growth rate of 14.4% as of April 1.
“The strength of the rally is primarily due to earnings growth, which is great,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
“Market watchers will be watching next week when major retailers’ reports are released to see if there is any change in consumer spending behavior in response to higher gas prices.”
But as earnings season draws to a close, the focus returns to macroeconomic and geopolitical developments.
President Donald Trump has dismissed Iran’s response to the U.S. peace proposal, sending oil prices soaring and fueling fears that a prolonged conflict will continue to put upward pressure on inflation, especially at gas pumps where consumers are feeling the pinch.
In that regard, investors will be paying close attention to this week’s economic data, particularly the Labor Department’s Consumer Price Index and the Commerce Department’s Retail Sales Report, scrutinizing the data for signs that the ongoing rise in energy prices could translate into broader inflation or impact consumer spending.
This week’s economic calendar also includes producer prices and industrial production.
Later this week, President Trump is scheduled to meet with Chinese President Xi Jinping in Beijing for talks that will cover a wide range of issues, including the Iran war, trade, nuclear weapons, Taiwan, artificial intelligence and a possible extension of a crucial rare earth minerals deal.
According to preliminary data, the S&P 500 (.SPX) rose 14.62 points (0.20%) to end at 7,413.55 points, while the Nasdaq Composite Index (.IXIC) rose 25.88 points (0.10%) to 26,272.96 points. The Dow Jones Industrial Average (.DJI) rose 100.46 points (0.20%) to 49,709.62.
Companies scheduled to report this week include high-tech networking giant Cisco (CSCO.O) and semiconductor manufacturing equipment maker Applied Materials (AMAT.O), with giants Nvidia (NVDA.O) and Walmart (WMT.O) also scheduled to report later in the month.
Intel (INTC.O) rose on Monday, following a 14% jump on Friday on reports of a preliminary chip manufacturing agreement with Apple (AAPL.O), while peer Qualcomm (QCOM.O) soared to a record high.
Media giant Fox Corporation (FOXA.O)’s third-quarter sales rose above expectations.
Among the gainers, some airline stocks fell as rising oil prices threatened to squeeze margins.
Reporting by Ragini Mathur and Utkarsh Hati in Bangalore. Edited by: Devika Syamnath and David Gregorio
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