Wall Street ended at a record high on Friday, bouncing back from losses in the prior session, helped by a jump in chip stocks and a stronger-than-expected April U.S. jobs report.
Market participants also kept a close eye on developments in the Middle East, as new skirmishes in the Strait of Hormuz kept traders on edge. President Donald Trump told ABC News that the U.S.-Iran ceasefire was still in effect despite the fresh fighting.
The benchmark S&P 500 index climbed 0.8% to 7,396.79 points, while the tech-heavy NASDAQ Composite added 1.7% to 26,247.08 points. Both gauges scaled record highs, while the S&P briefly topped 7,400 for the first time ever.
The Dow Jones Industrial Average concluded little changed at 49,609.04 points. The blue-chip gauge lagged its two peers, primarily due to a fall in Dow 30 components McDonald’s and Salesforce.
For the week, the S&P gained 2.3%, the Nasdaq 4.5%, and the Dow 0.2%.
Solid jobs report, consumer sentiment hits record low
The economic calendar was in focus on Friday, with the spotlight on the April jobs report.
Nonfarm payrolls edged up 115k last month, the U.S. Bureau of Labor Statistics said, better than the 65k that economists were expecting. The unemployment rate held steady at 4.3%.
While the report was closely anticipated, it comes at a time when market participants and watchers of monetary policy are more focused on inflation due to surging oil prices sparked by the ongoing Middle East conflict. Analysts noted that the April data suggested a hit to wage growth due to inflation.
This morning’s labor data is just another sign of continued resilience in the US economy – especially following such a buoyant March report. That being said, while it is a short-term positive indicator, lagging inflationary pressures still risk sending the economy into a tailspin," Yerbol Orynbayev, former World Bank governor of Kazakhstan, said.
Coming into the report, traders had priced in a small chance of the Federal Reserve hiking interest rates this year to potentially combat the inflationary shock from the war. But odds of rate hikes were tempered after the data was released, according to the CME FedWatch tool.
"April’s decent payrolls growth extends a trend of stronger job growth since the turn of the year. The job market is inching out of low hire, low fire mode into moderate hire, low fire mode. This is reassuring news after business and consumer surveys reported a pickup in anxiety about the Iran War in the last few releases," Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said.
Speaking of consumer surveys, the University of Michigan on Friday said consumer sentiment in May slid to 48.2 from 49.8 in April, according to a preliminary estimate. This is the lowest reading on record.
"Consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump. Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall," the University of Michigan said.
U.S. and Iran exchange fire in Hormuz
Turning to the Middle East conflict, the situation in and around the critical Strait of Hormuz remained at the top of investors’ minds. The vital waterway through which a fifth of the world’s oil and gas flows has been effectively shuttered by Iran since the start of the conflict at the end of February, leading to the biggest supply disruption in history.
The U.S. earlier this week launched and then paused an effort called "Project Freedom" to safely help commercial ships transit the strait. Meanwhile, the U.S. military since mid-April has maintained a blockade of Iran’s ports and coastline in order to pressure Tehran.
On Friday, U.S. Central Command said it had fired upon and disabled two Iranian-flagged empty oil tankers attempting to pull into an Iranian port in the Gulf of Oman. CENTCOM also said it had disabled another empty tanker on Wednesday.
The CENTCOM update came a day after the U.S. military said it had intercepted Iranian attacks on three American warships transiting the Strait of Hormuz. Fox News said the U.S. had retaliated against the attacks by striking targets on Iran’s Qeshm port and the city of Bandar Abbas in and near the strait, citing a senior U.S. official.
The flare up in fighting comes at a time when Iran said it was still reviewing a new one-page, 14-point proposal that could potentially bring an end to the conflict, and that it had not yet reached a conclusion.
Trump told ABC News that the new attacks were "just a love tap" and that the ceasefire between the U.S. and Iran was still "in effect." He later posted on social media: "We’ll knock them out a lot harder, and a lot more violently, in the future, if they don’t get their Deal signed, FAST!"
U.S. Secretary of State Marco Rubio on Friday told reporters that a response from Iran was expected today and nothing had been received yet.
Against this backdrop, oil prices were largely higher. Brent crude futures expiring in July, the global oil benchmark, were last up 0.5% to $100.56 a barrel, while U.S. West Texas Intermediate crude futures expiring in June slipped 0.1% to $94.68 a barrel.
Earnings season
Away from the war, earnings continued to grab eyeballs. A stellar season so far has played its part in helping Wall Street look past the Middle East and return to record levels.
"Markets are responding to what they can measure – profits. The AI-driven earnings story remains powerful, and that strength is offsetting geopolitical uncertainty for now. Indeed, we are seeing a profits boom right now," Keith Lerner, chief investment officer and chief market strategist at Truist, told Investing.com.
"Investors appear to be betting that we’re past the peak of uncertainty in the Middle East and that, even if the path is uneven, some form of resolution ultimately emerges. That said, this isn’t without risk. Key markers to watch are the March peak in oil prices and whether the 10-year Treasury pushes meaningfully above 4.5%," he said.
"Still, based on the weight of the evidence—a resilient economy and a profits boom—the bull market continues to deserve the benefit of the doubt," Lerner added.
In earnings-related moves, Airbnb closed 0.7% higher after the vacation rental firm delivered a quarterly revenue beat and issued current quarter revenue guidance that beat expectations.
CoreWeave stock slumped 11.4% after the artificial intelligence hyperscaler reported a significant miss on quarterly profit and gave a disappointing current quarter revenue outlook.
Class A shares of Coinbase Global reversed course to settle 4.3% higher, despite the cryptocurrency exchange swinging to a quarterly loss due to a steep decline in prices of digital assets.
In other moves, chip stocks bounced back from the previous session, led by Micron Technology, Intel and AMD.
Intel in particular gained 13.9% after the Wall Street Journal reported that the legacy tech firm had reached a preliminary chipmaking agreement with Apple, citing people familiar with the matter.
"The AI and tech trade can seemingly do no wrong as it has become the only game in town for investors," Jake Dollarhide, CEO at Longbow Asset Management, told
