Wall Street inches to higher close, AI fervour edges out Iran impasse

[NEW YORK] US stocks closed slightly higher on Monday (May 11), with AI optimism fuelling upward momentum even as the earnings-driven fervour of the recent rally eased in the home stretch of reporting season and as crude prices rose, stoking inflation worries as US-Iran peace negotiations stalled.

All three major US stock indexes advanced and the S&P 500 and the Nasdaq eked out their latest in a series of all-time closing highs.

Semiconductors handily outshone other sectors, with the PHLX Semiconductor index jumping 2.6 per cent, suggesting the AI wave is showing few signs of abating.

“The semis and AI infrastructure trade has taken on a life entirely of its own,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “And there’s so much momentum and chasing to get in on some of these names that it seems almost somewhat divorced from any sort of like headline or announcement.”

But some market watchers believe the rally is about to run out of momentum.

Investor Michael Burry warned on Monday that stocks are likely about to crash. In a post on his Substack, Burry, one of the biggest winners of the 2008 financial meltdown, said that the 2026 rally in tech stocks is about to end with a thud. “The market has jumped the shark,” he wrote.

First-quarter reporting period is nearing the finish line, with 440 of the companies in the S&P 500 having reported. Of those, 83 per cent have topped earnings expectations, according to LSEG IBES.

As at Friday, analysts estimated first-quarter S&P 500 earnings growth, on aggregate, of 28.6 per cent year on year. That’s nearly double the 14.4 per cent first-quarter growth estimates as at Apr 1.

“The strength of the rally largely is a function of earnings growth, which is superb,” said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis.

SEE ALSO

US stocks: Wall Street pauses after record run as US-Iran talks stall

“Market watchers are looking ahead to next week, when the big-box retailers report, to get a sense of if there’s any change in consumer spending behaviour following, you know, elevated prices at the gas pump.”

But as earnings season nears the finish line, focus returns to macroeconomics and geopolitical developments.

US President Donald Trump dismissed Iran’s response to a US peace proposal, causing crude prices to spike and stoking concerns that a prolonged conflict will keep putting upward pressure on inflation, particularly at the petrol pump, where consumers are feeling the pinch.

On that point, investors will pay close attention to economic indicators this week, particularly the Labor Department’s Consumer Price Index and the retail sales report from the Commerce Department, scanning the data for signs that the ongoing surge in energy prices is metastasising into broader inflation or affecting consumer spending.

Producer prices and industrial output are also on this week’s economic calendar.

Later this week, President Trump is due to meet his Chinese counterpart Xi Jinping in Beijing for talks covering a broad range of issues, including the Iran war, trade, nuclear weapons, Taiwan, artificial intelligence and possible extension of a critical rare-earth minerals deal.

The Dow Jones Industrial Average rose 95.31 points, or 0.19 per cent, to 49,704.47, the S&P 500 gained 13.91 points, or 0.19 per cent, to 7,412.84 and the Nasdaq Composite gained 27.05 points, or 0.1 per cent, to 26,274.12.

Among the 11 major sectors of the S&P 500, energy stocks boasted the largest percentage gains, while communication services were the biggest laggards.

Companies slated to report this week include tech networking giant Cisco and semiconductor equipment maker Applied Materials, while heavyweights Nvidia and Walmart are due to report later in the month.

On Monday, Intel rose 3.6 per cent after surging 14 per cent on Friday on a report of a preliminary chip-making agreement with Apple, while peer Qualcomm jumped 8.4 per cent to a record high.

Media major Fox rose 7.6 per cent after beating third-quarter revenue estimates.

Among other movers, some airline stocks slipped as rising oil prices threatened to squeeze margins. Southwest Airlines, Delta Air Lines, Alaska Air and United Airlines fell between 2.9 per cent and 4.4 per cent.

Declining issues outnumbered advancers by a 1.08-to-1 ratio on the NYSE. There were 567 new highs and 144 new lows on the NYSE.

On the Nasdaq, 2,129 stocks rose and 2,704 fell as declining issues outnumbered advancers by a 1.27-to-1 ratio.

The S&P 500 posted 39 new 52-week highs and 42 new lows while the Nasdaq Composite recorded 157 new highs and 164 new lows.

Volume on US exchanges was 21.42 billion shares, compared with the 17.99 billion average for the full session over the last 20 trading days. REUTERS