Stocks closed higher Thursday after reports of a draft U.S.-Iran ceasefire extension lifted investor confidence, even as inflation rose at its fastest annual pace in three years.
By yourNEWS Media Newsroom
The S&P 500 and Nasdaq closed at record highs Thursday after reports that the United States and Iran had reached a draft agreement to extend their ceasefire for 60 days helped lift investor sentiment across major technology, health care and artificial intelligence-linked stocks.
The market rally followed a report from Axios that said U.S. and Iranian negotiators had reached a tentative framework that would extend the ceasefire while talks proceed over Iran’s nuclear program. The plan still requires approval from President Donald Trump.
The S&P 500 gained 43.50 points, or 0.58%, to close at 7,563.71, according to preliminary data. The Nasdaq Composite rose 239.79 points, or 0.91%, to 26,917.47. The Dow Jones Industrial Average added 24.11 points, or 0.04%, ending at 50,666.29.
Investors also weighed fresh economic data showing inflation accelerated in April while growth slowed. The personal consumption expenditures price index rose at its fastest annual pace in three years, driven largely by higher energy prices tied to the Iran war. First-quarter gross domestic product was revised down to a 1.6% annualized increase, and economists expect momentum to cool further this quarter.
Jamie Cox, managing partner at Harris Financial Group, said markets are moving quickly in response to signs of progress in the Middle East.
“Traders are on a hair trigger with the back-and-forth on deal news, and have been leaning long to avoid getting trampled by a better-than-expected outcome. The harder part is that the inflationary forces may not abate as fast as markets want,” Cox said.
Health care stocks posted strong gains, led in part by Eli Lilly. The drugmaker’s shares advanced after CVS Health said it would restore coverage of Lilly’s weight-loss injection Zepbound and add coverage for Foundayo, the company’s newly approved obesity pill.
Technology stocks also climbed. Microsoft gained after The Information reported that the company plans to release a new coding model next week. Marvell Technology rose after UBS lifted its price target on the stock to $230 from $195. Marvell shares have more than doubled so far this year.
Snowflake surged after the data analytics company raised its annual product revenue forecast and announced a five-year artificial intelligence infrastructure agreement worth $6 billion with Amazon Web Services. Other software and data companies, including Datadog and MongoDB, also moved higher.
The renewed strength in artificial intelligence-related stocks helped extend the broader rally despite persistent geopolitical and inflation concerns. Investors have continued to focus on earnings growth, corporate resilience and expected long-term spending in technology.
“Markets continue to look through these risks because the global economy and corporate earnings remain relatively resilient,” said Jitania Kandhari, deputy CIO for solutions and multi-assets at Morgan Stanley Investment Management.
Kandhari said instability could also increase demand for technology and infrastructure tied to national security and supply-chain protection.
“Geopolitical instability could ultimately accelerate spending in areas tied to AI, including cybersecurity, defense technology, energy infrastructure and supply-chain resiliency, reinforcing the long-term investment case,” Kandhari said.
The S&P 500 is trading at roughly 21 to 22 times forward earnings, above its trailing 10-year average of 19.7 times. Kandhari said investors appear less concerned about elevated valuations because earnings expectations are rising faster than stock prices.
Several consumer and retail names also gained. Dollar Tree climbed after raising its full-year profit forecast, while Best Buy rose after forecasting second-quarter sales above analysts’ expectations.
Drone stocks advanced after The Wall Street Journal reported that the Trump administration is discussing possible funding for drone companies. Shares of Unusual Machines surged following the report.
The day’s gains reflected investor optimism that a longer ceasefire could reduce pressure on energy markets and global supply chains. Still, economists and market strategists cautioned that inflation remains a major risk, particularly if energy disruptions persist or if the Federal Reserve keeps interest rates elevated for longer than investors expect.