United States equities resumed their advance on Monday, driven by strong earnings reports that prompted bullish Wall Street strategists to raise their targets on the S&P 500 for the year, even as concerns about the duration of the Iran war persisted. The S&P 500 rose 0.2 percent by mid-morning in New York, led by gains in the energy and materials sectors. Nvidia Corp. was the biggest contributor to the index's rise, as ongoing strength in chip stocks lifted the benchmark. Qualcomm Inc. and Micron Technology Inc. were among the top performers.
The tech-heavy Nasdaq 100 edged up 0.1 percent, while the Dow Jones Industrial Average erased earlier losses to trade little changed. Markets appeared to shrug off U.S. President Donald Trump's rejection of Iran's response to a proposal to end the Middle East war, which he deemed "totally unacceptable."
"Markets still believe a cease fire agreement will be reached," said Tom Essaye, founder of the Sevens Report, explaining why stocks were not selling off more sharply. Crude prices climbed, with West Texas Intermediate oil approaching US$100 a barrel. The Cboe Volatility Index hovered around 18, indicating relatively low market anxiety.
"The geopolitical front remains extremely uncertain, but investors continue to be able to look past these issues," said Matt Maley, chief market strategist at Miller Tabak + Co. The strength of first-quarter earnings surprises has led multiple Wall Street strategists to raise their full-year targets on the S&P 500. CFRA increased its target to 7,730 points from 7,400, citing resilient consumer spending and AI-related investment. Yardeni Research Inc. now has the highest estimate on Wall Street, expecting the benchmark to end the year at 8,250, up from 7,700.
"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," wrote Ed Yardeni, president and chief investment strategist at Yardeni Research. The recent gains in AI stocks and semiconductors resemble the melt-up phase from 1999, according to Vital Knowledge founder Adam Crisafulli. South Korea's main stocks index jumped 4 percent on Monday.
However, some see dangers in the market's sharp climb. Michael Burry said the market had "jumped the shark" in an early morning web post. Strategists are also concerned that elevated oil prices and fears about potential shortages could derail the rally. Morgan Stanley warned 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," said Sarah Hunt, chief market strategist at Alpine Saxon Woods. Traders also parsed disappointing existing home sales for April, which trailed economists' expectations. Other key data this week include an inflation report on Tuesday, producer prices on Wednesday, and both import prices and retail sales on Thursday. Traders are also waiting for a meeting between Trump and Chinese President Xi Jinping expected later this week in Beijing.
