U.S. equities, which have climbed sharply since late March, will be guided next week by fresh inflation and consumer spending data, developments related to the Iran war and a high-profile summit between the leaders of the United States and China. The benchmark S&P 500 has rebounded more than 15% from its low for the year, set in late March, and the index is up roughly 7% so far in 2026 as of Thursday. The technology-heavy Nasdaq Composite has risen about 11% on the year, with both indexes trading at record levels.
Market participants attribute much of the uplift to an unusually strong quarterly earnings season. S&P 500 earnings are on track to rise 28% in the quarter, according to LSEG IBES data, with massive corporate spending on artificial intelligence passing through to results across multiple industries. That wave of corporate investment has underpinned confidence that recent shocks to margins - whether from tariffs or higher oil prices - have not yet materialized broadly.
"We have seen this tremendous rebound as markets have willed themselves to focus on only the positive," said Kristina Hooper, chief market strategist at Man Group. For many investors, a combination of robust corporate profits and the fear of missing out on gains has accelerated buying into equities.
Geopolitics, however, remains a front-and-center concern. The conflict that began in late February with U.S.-Israeli strikes on Iran has raised energy and shipping risks that could weigh on markets if they intensify. Energy markets have already reflected that uncertainty: U.S. crude is up more than 60% for the year, and gasoline prices have climbed, putting pressure on household budgets.
Wall Street is watching for signs of de-escalation, particularly a reopening of the Strait of Hormuz, a strategic chokepoint for global oil shipments. "The continued progress towards a resolution for the U.S.-Iran war will be top of mind for investors," said Michael Arone, chief investment strategist at State Street Investment Management. "You need to begin to see ship movements in the Strait of Hormuz." Any visible improvement in shipping traffic would likely be interpreted as a step toward easing the energy-driven inflation shock.
The Iran war is also expected to be discussed when the U.S. President meets with Chinese President Xi Jinping in Beijing late next week. Investors will monitor that summit for developments around access to rare earths and technology, among other issues that can affect supply chains and key industrial sectors.
Corporate earnings will continue to shape market momentum even as the first-quarter reporting season winds down. Results due next week include networking equipment maker Cisco and semiconductor equipment supplier Applied Materials. Heavyweights Nvidia and Walmart are scheduled to report later in the month. The flow of results tied to AI infrastructure spending has been a notable driver of the quarterly jump in profits.
Economic releases covering April should help the market assess how the Iran conflict and energy-price shock are filtering through the economy. Tuesday's consumer price index - a widely watched gauge of inflation - is expected to show a 0.6% month-over-month increase, according to a Reuters poll. That follows a 0.9% rise in March, the largest monthly advance in nearly four years, driven in large part by higher gasoline prices.
With many market participants expecting a relatively quick resolution to the conflict, attention may tilt toward core inflation measures that strip out volatile energy components and provide clearer guidance on the future path of interest rates. "If core CPI is significantly higher, I think that’s going to be very problematic," Hooper said, highlighting the potential for higher core inflation to complicate policy expectations.
Other data next week will also be closely watched. Wednesday's producer price figures will provide another perspective on inflationary pressures further up the supply chain, while Thursday will bring monthly retail sales, which investors will scrutinize for signs that rising gasoline and energy costs are curbing discretionary spending. The national average price for gasoline recently topped $4.50 a gallon for the first time since July 2022, underscoring the potential for energy costs to reallocate household budgets.
"Even with oil bouncing around a bit and coming down from the highs, gasoline prices across the U.S. have just continued to move higher," said James Ragan, co-CIO and director of investment management research at D.A. Davidson. "We haven’t had any relief there. I don’t think there is a lot of evidence yet that it’s hurting the consumer spending, but it’s definitely a larger budget item."
In sum, the rally in U.S. stocks rests on two pillars that will be tested in the coming days: continued strength in corporate earnings - particularly related to AI investment - and a moderation of energy and geopolitical risks that have driven recent inflation readings. Investors will be parsing the upcoming data and diplomatic developments for signals about whether the current momentum is sustainable.
What to watch next week
- Tuesday - April Consumer Price Index (CPI), expected +0.6% month-over-month
- Wednesday - Producer Price Index (PPI)
- Thursday - Monthly retail sales
- Corporate earnings: Cisco and Applied Materials report next week; Nvidia and Walmart later in the month
- Diplomatic developments: U.S.-China leader meeting in Beijing and any sign of improved ship movements in the Strait of Hormuz