The S&P 500 closed April at a fresh record high, capping its strongest monthly performance in over three years, as investors weighed escalating geopolitical tensions in the Middle East against robust corporate earnings and signs of continued economic resilience in the United States.
The benchmark index rose 1% on Thursday, taking its gains for the month to more than 10% its best showing since November 2020.
The rally also marked the index’s fifth consecutive week of advances, a streak not seen since late 2024.
Meanwhile, the Nasdaq’s monthly gain was its largest since April 2020, and the Dow’s monthly advance was its biggest since November 2024.
Markets rally on growth and earnings momentum
Investor sentiment was buoyed on Thursday by data indicating modest economic expansion in the first quarter, supported in part by strong business investment in artificial intelligence infrastructure.
The steady growth outlook, combined with better-than-expected corporate earnings, helped underpin the rally in equities.
Technology giants including Alphabet, Amazon, Microsoft and Meta Platforms reported heavy spending on data centers, collectively investing about $130 billion as they scale up AI capabilities.
The earnings strength has broadened beyond a handful of companies, providing wider support to markets.
“A lot of the economic data calmed investors’ fears,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.
“Beyond that, you’ve got some pretty good earnings from a lot of different companies, and we’re seeing that broaden out today.”
He added that current conditions continue to favour equities. “Until we see some changes to the market dynamic, as well as the economy, the momentum is on the bullish side.”
Oil surge highlights geopolitical risks
The upbeat tone in equities was brought about despite energy markets being far more volatile.
Oil prices surged during the month amid the ongoing conflict involving Iran, with a naval blockade disrupting supply routes.
Brent crude briefly climbed above $120 a barrel, marking a four-year high, before retreating in choppy trading.
The spike in crude prices has already begun filtering through to consumers, with gasoline prices in the US rising sharply.
The average price of regular gasoline reached $4.30 per gallon, up 27 cents in a week, according to data from AAA.
“Markets are being pulled in opposing directions as surging oil prices and geopolitical risks weigh on sentiment, while strong tech earnings and AI optimism provide support,” said Bob Savage, head of markets macro strategy at BNY.
Fed signals caution amid inflation pressures
The conflicting signals have complicated the outlook for the Federal Reserve, which held interest rates steady this week.
Chair Jerome H. Powell warned that policymakers remain cautious given the uncertain trajectory of inflation, particularly as energy costs rise.
“We’re very well aware that people are experiencing higher gas prices all over the country now,” Powell said.
He noted that sustained increases in oil prices could ripple across the economy, raising costs for transportation, air travel and other goods and services.
“People are going to start to feel that,” he added.
Economists expect inflationary pressures to persist.
Bernard Yaros, lead US economist at Oxford Economics, said higher energy costs and lingering tariff effects are likely to keep inflation elevated in the near term.
“Inflation will get worse before it improves,” he wrote.
Sector gains led by tech and semiconductors
The rally in equities has been led by communication services and technology stocks, reflecting investor enthusiasm for AI-driven growth.
The communications-services sector surged 18.4% in April, with Alphabet’s shares rising 33.8% during the month.
The information-technology sector climbed 17.4%, supported by strong gains in semiconductor stocks.
The PHLX Semiconductor Index jumped 38.4% in April, extending its rally as demand for chips tied to artificial intelligence continued to accelerate.
Among individual stocks, Intel emerged as the biggest gainer in the S&P 500, with its shares more than doubling during the month as investors responded positively to its turnaround strategy and stronger-than-expected earnings.
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