The S&P 500 extended its recovery from the 6,310 low to a record high of 7,515 before easing back to 7,380, bringing the RSI out of overbought territory. Strong U.S. corporate earnings have emerged as a bright spot, with members of the S&P 500 on track to register a 27.1% year-over-year increase in profits, according to a FactSet analysis of reported and estimated earnings as of May 1. This would mark the strongest rate of earnings growth since the fourth quarter of 2021. Silicon Valley has stood out amid the AI infrastructure boom, with 97% of information technology companies beating analysts' earnings estimates—better than any other sector. Despite the broader market weakness, Home Depot rose modestly after reporting earnings and revenue ahead of expectations, posting earnings per share of $3.43 on revenue of $41.77 billion. Blackstone and Alphabet advanced after Blackstone announced a $5 billion investment into a new AI infrastructure venture alongside Google, though overall market sentiment remains fragile as investors assess Middle East developments.
The primary driver of current market weakness continues to be elevated Treasury yields, with the 10-year Treasury yield remaining around 4.6%, creating significant pressure on tech-heavy sectors. As reported by MarketPulse, the new Warsh Trade is especially risky for tech-heavy sectors that have grown too quickly, with less liquidity causing investors to rethink the current extreme pricing of high-growth assets. Inflation concerns and fears that major central banks may need to maintain tighter policy for longer are challenging the AI-driven rally that has supported equities in recent months. **New York Fed President John Williams had warned in a Monday speech that supply-chain issues tied to the Iran war
Oil prices retreated around midweek as U.S.-Iran peace talks reportedly progressed, with crude prices falling as U.S. operations to protect commercial ships navigating the Strait of Hormuz launched. Crude still trades above $100 a barrel and significantly above pre-war levels, with investors remaining concerned over the inflationary implications for the region. Supply concerns nevertheless remain elevated, with US strategic petroleum reserves falling by a record 9.9 million barrels last week, leaving stockpiles at 374 million barrels, the lowest level since July 2024. Central banks in Europe, where the oil shock's impact is particularly pronounced, could be more hawkish, with **Joachim Nagel, governor of Germany's central bank Bundesbank, saying the European Central Bank might deliver a rate hike if its economic forecasts don't
The S&P 500 holds above key moving averages with technical analysis indicating the broader uptrend remains intact. Support is seen around 7,340, last week's low, and the 20-day moving average near 7,270, while a move below 7,000 would be needed to threaten the longer-term bullish structure. The Russell 2000 (IWM) has returned to April swing low levels and is positioned just above January swing highs, creating a natural support zone for potential trading range establishment. With blue skies above, buyers will look for a break above 7,515 to bring 7,600 into focus, though the current correction remains quite contained with ongoing rebalancing and profit-taking from Semiconductors, Tech, and Magnificent 7s leading the pullback.
Uneven employment figures in the U.S. add to a complex outlook, with economists' median estimate suggesting there were 55,000 jobs gained in April, down from 178,000 in March. At the end of March, the number of jobs available at U.S. employers rose slightly to 6.95 million while total hires hit their highest level since February 2024, according to the Labor Department. Investors are also parsing quarterly earnings, which have generally painted a rosy picture of corporate America's balance sheets, with the April jobs report due on Friday providing crucial insights into labor market conditions. With the Federal Reserve's latest meeting minutes due Wednesday for clues on policymakers' easing bias, attention turns to minutes from the Federal Reserve's latest meeting due Wednesday for clues on policymakers' easing bias, with New York Fed President John Williams saying his base case is for inflation to settle around 3% in 2026 and drop to the Fed's target of 2% next year.
