S&P 500, Nasdaq hit record highs on AI optimism, Middle East peace hopes
Market Rally Driven by AI and Geopolitical Developments
By Niket Nishant and Utkarsh Hathi
Record Highs Fueled by Artificial Intelligence
May 6 (Reuters) - The S&P 500 and the Nasdaq hit record highs on Wednesday, extending their strong run powered by sustained enthusiasm around artificial intelligence and the prospect of a U.S.-Iran peace agreement.
AI Frenzy and Corporate Performance
The latest round of AI frenzy came after Advanced Micro Devices forecast second-quarter revenue above expectations, on robust demand for its data-center chips.
The rally has shown that the market "cannot escape the euphoria surrounding AI investment," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research.
Economic Headwinds and Resilience
"A more protracted war and further climb in gasoline prices make for stronger spending headwinds, but until there are clear signs of job loss, the economy remains distanced from a full-blown recession."
The ADP National Employment Report on Wednesday showed U.S. private-sector employment jumped by 109,000 jobs in April, the biggest increase since January 2025.
Geopolitical Tensions and Oil Prices
Meanwhile, oil prices fell to a two-week low, with Brent crude futures slipping 6.6% and dragging the S&P 500 energy index 3% lower. Washington and Tehran were closing in on an agreement over a one-page memorandum to end the war, a Pakistani source said.
Prospects for Peace in the Middle East
In its current form, the memorandum would declare an end to the conflict and the start of a 30-day period of negotiations on a detailed agreement to open the Strait of Hormuz, limit Iran's nuclear program and lift U.S. sanctions, Axios reported.
The gains in equities reflect rising risk appetite among investors - if corporate earnings remain strong and hopes for a peace deal stay alive. However, others warned against unfettered optimism unless there were more concrete signs of progress.
Analyst Perspectives on Market Risks
"Wall Street continues to double down on its bet that the war in the Middle East will not re-escalate and disrupt the market's earnings-driven surge to all-time highs," said Kyle Rodda, senior financial market analyst at Capital.com.
"There's a high risk that if that wager is wrong, risk assets would move sharply in reverse. However, the signals sent from the United States appear to offer reassurance that it's not interested in renewing hostilities."
Market Performance and Sector Highlights
At 09:56 a.m. ET, the Dow Jones Industrial Average rose 450.72 points, or 0.91%, to 49,744.78, the S&P 500 gained 57.64 points, or 0.79%, to 7,316.86 and the Nasdaq Composite gained 256.35 points, or 1.01%, to 25,582.48.
Sector Gains and Semiconductor Surge
Eight of the 11 major S&P 500 sectors were in positive territory. The Philadelphia SE Semiconductor index rose 2.9% and hit another record high.
AMD jumped 16.7%, while rival Intel rose 2.7%. Super Micro soared 16.6% following a stronger-than-expected forecast for fourth-quarter revenue and adjusted profit.
Alphabet surged 1.5%, while Nvidia rose 4%.
Market Breadth and New Highs
Advancing issues outnumbered decliners by a 2.27-to-1 ratio on the NYSE and by a 1.54-to-1 ratio on the Nasdaq.
The S&P 500 posted 36 new 52-week highs and 13 new lows while the Nasdaq Composite recorded 115 new highs and 50 new lows.
(Reporting by Niket Nishant and Utkarsh Hathi in Bengaluru; Editing by Pooja Desai and Arun Koyyur)
