U.S. equity markets closed April on a powerful upswing, and investors are looking to the next tranche of corporate earnings and incoming labor-market data to determine whether that momentum can persist into May. The rally comes as oil prices climbed to multiyear highs and as Federal Reserve officials signaled a less unanimous posture on monetary policy.
Major indexes finished Thursday at record territory after a sharp month-long recovery from concerns tied to the Middle East conflict. A broadly solid corporate reporting season has been a primary force behind the optimistic market tone, offsetting pressures from higher crude and rising bond yields.
The benchmark S&P 500 and the technology-heavy Nasdaq Composite recorded their biggest monthly gains since 2020, with the S&P 500 rising more than 10% in April and the Nasdaq jumping over 15% during the month.
"We have these fast-rising profits on one side, and then on the other, we have upward pressures on oil prices and bond yields," said Angelo Kourkafas, senior global investment strategist at Edward Jones. "We ��ve rallied a lot in April, so potentially we may enter some period of consolidation as this pull and push is playing out."
Energy markets were volatile this week, with benchmark Brent crude topping $120 a barrel and reaching a four-year high before easing. The supply shock has been linked in market commentary to disruptions associated with the two-month U.S.-Israeli conflict with Iran, which has curtailed a notable source of oil supply. While a ceasefire agreement earlier in the rebound provided a catalyst for equities, lingering tensions in the region continue to pose a source of uncertainty for investors.
Market strategists note the competing forces at work: above-trend corporate profits supporting higher equity valuations, and geopolitical-driven energy price spikes and climbing Treasury yields that could tighten financial conditions.
"With each passing day, the economic risk grows," said Jeff Buchbinder, chief equity strategist for LPL Financial. "If we ��re sitting here in a month or two, and Brent crude is still over $120, and we ��ve still got a blockade and maybe bombs are still falling, that is a very different scenario than what we ��re looking at right now."
Another heavy week of earnings
More than 100 companies in the S&P 500 are scheduled to report next week, representing the heart of the reporting season when investors parse results for signs of sustainability in profit growth and forward guidance. As of Thursday, overall S&P 500 earnings for the first quarter were on track to climb more than 20% from a year earlier, according to Tajinder Dhillon, head of earnings and equity research at LSEG Data & Analytics.
Big technology names that have been investing in artificial-intelligence infrastructure produced mixed reactions this week. Shares of Alphabet rallied after strong cloud-computing growth, while Microsoft and Meta Platforms retreated after results that disappointed market expectations.
High-profile companies due to release results next week include data analytics firm Palantir, entertainment giant Walt Disney and restaurant chain McDonald ��s. Semiconductor chipmaker Advanced Micro Devices will also draw close scrutiny, given the sector ��s recent volatile gains.
Michael O ��Rourke, chief market strategist at JonesTrading, highlighted the outsized market role of the semiconductor complex: "This is the group that is dominating the tape and dominating the market. Any datapoints you get are going to be really important." Over the past month, AMD shares are up some 80% and the Philadelphia SE Semiconductor index is up over 45%.
Jobs data and fading rate-cut hopes
Attention will turn to the April payrolls report due on May 8, which economists polled by Reuters expect to show payroll growth of 73,000 jobs. That would mark a slowdown from the 178,000 jobs added in March but an improvement relative to the sharp decline recorded in February. Strategists describe the job market as slowing but still resilient.
Recent Fed commentary and actions have diminished investor expectations for interest-rate cuts this year. At this week ��s Federal Reserve meeting, three Fed board members publicly objected to language in the policy statement they believed did not adequately reflect inflation risks that could necessitate a rate hike, signaling a less unified stance at the central bank.
That more hawkish tilt, together with rising crude prices, pushed benchmark U.S. Treasury yields to one-month highs. The yield on the widely watched 10-year Treasury was last around 4.4%.
Higher yields raise questions about cost pressures for borrowers. "The 10-year above 4.5% will certainly catch more investors �� attention," Kourkafas said. "At that point, investors might start rethinking valuations and get a little more worried." Higher long-term rates can translate into steeper borrowing costs for consumers and businesses, which could affect sectors sensitive to financing conditions.
Implications for investors
The coming week will be a test of whether the earnings-driven bullishness is resilient enough to withstand elevated oil prices and a retightening of financial conditions via higher yields. Corporate reports will offer fresh data points on revenue and margin trends and help investors assess whether recent profit strength reflects enduring fundamentals.
In that environment, market participants will be watching semiconductor earnings closely for confirmation that recent share-price advances are justified, while energy-related developments will continue to be a key risk monitor for broader financial stability.
Market data referenced in this article included sector and index moves and prices current through Thursday ��s close.