US equities notched modest gains Monday as strong earnings reports spurred bullish Wall Street strategists to raise their targets on the S&P 500 this year despite lingering concerns about the duration of the Iran war ahead of a key inflation reading.
The S&P 500 ended the session 0.2% higher in New York, paring gains as oil prices ticked higher after US President Donald Trump called Iran's response to his proposal to end the war "totally unacceptable" and said the ceasefire agreement was on life support. Energy was the top-performing sector in the market. The tech-heavy Nasdaq 100 rose 0.3% while the Dow Jones Industrial Average ended the day up 0.2%.
The Cboe Volatility Index hovered around 18.
"Markets are pricing both AI-driven growth and the Middle East supply shock," said Jean Boivin, head of BlackRock Investment Institute. He said the buildout of AI data centers is offsetting the oil supply shock's "drag on growth."
Investor attention is turning to Tuesday morning's CPI report to gauge the war's impact on inflation. A poll conducted by 22V Research LLC showed investors expect hotter inflation and most think the Federal Reserve should raise interest rates to tame price appreciation.
For now, strategists remain optimistic on the market.
While the Iran conflict has dragged on, the strength of first-quarter earnings surprises has now led multiple Wall Street strategists to raise their full-year targets on the S&P 500. CFRA upped their target to 7,730 points from 7,400 on resilient consumer spending and AI-related investment. Yardeni Research Inc. now has the highest estimate on Wall Street among strategists tracked by Bloomberg. The firm expects the US benchmark to end the year at 8,250, up from 7,700 points.
"We've never seen consensus earnings expectations rise so quickly for the current and coming years as they have in recent months. The result has been an earnings-led meltup in the stock market," Ed Yardeni, president and chief investment strategist at Yardeni Research, wrote in a note Sunday.
Vital Knowledge founder Adam Crisafulli said the recent gains in AI stocks and semiconductors resembles the melt-up phase from 1999.
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Others see dangers in the market's sharp climb in recent weeks. Short-seller Michael Burry said the market had "jumped the shark" in an early morning web post.
Some on Wall Street are also concerned that elevated oil prices and fears about potential shortages could derail the rally.
Morgan Stanley warned Monday that the oil market is in a "race against time" and that prices could move sharply higher if the Strait of Hormuz remains closed into June.
"The biggest concern is we've had a buffer on energy prices and there's arguments about when that stops out. When do we hit the bottom of the tanker and when does this really become an issue," Sarah Hunt, chief market strategist at Alpine Saxon Woods, said in an interview with Bloomberg Television.
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Traders also digested disappointing existing home sales for April. Other key data this week include producer prices on Wednesday and both import prices and retail sales on Thursday. A meeting between Trump and Chinese President Xi Jinping expected later this week in Beijing also has the potential to move markets.
Sectors in Focus
- Watch financials and other interest-rate-sensitive stocks Tuesday ahead of the April consumer price report.
- Electronics manufacturers will be in focus with results from Qnity Electronics, Inc. and Zebra Technologies Corp. expected before the opening bell.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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