U.S. stocks moved strongly last week, with the S&P 500 hitting a new high. Positive earnings news, growing AI demand, lower oil prices and falling interest rates lifted the market. Going forward, indicators such as the CPI are expected to be the focus.
U.S. stocks rose last week as heavy selling pressure eased, with the S&P 500 gaining 3.58% for the week and ending at an all-time high. The Nasdaq 100 rose 5.12%, highlighting the recovery in technology stocks. Even as some stocks faced profit-taking, other sectors such as financials and healthcare provided support, helping the broader indexes rebound.
Strong earnings provided the foundation for the market’s gains. S&P 500 earnings growth in the second quarter was up 50.4% year on year, or 32.0% excluding Alphabet and Amazon. Results from AI-related companies showed improvements in capital spending, orders, revenue and earnings, while software stocks also underwent a re-rating. Palantir reported a 93% year-on-year increase in revenue and raised its full-year outlook.
Performance among AI-related stocks highlighted the growing importance of stock selection. The SOX Index rose about 9%, while some stocks that had benefited from AI demand, including Western Digital and Seagate, declined, showing that AI demand is not spreading linearly across all stocks. Semiconductor stocks rose broadly overall, but the extent to which individual growth expectations had been priced in determined share-price performance.
AI investment is moving into a second phase, with cloud and software stocks also seeing buying interest return. Stocks with positive catalysts, including Atlassian and Twilio, attracted renewed buying, confirming that demand is broadening beyond the semiconductor-focused phase. The market is increasingly focused on how the benefits of AI adoption are reflected in revenue, margins and orders.
Lower oil prices and falling interest rates provided a macroeconomic tailwind. Brent crude fell about 8% over five trading days, while weaker employment data helped push interest rates lower. July nonfarm payrolls fell by 23,000, reducing expectations of further rate hikes by the Federal Reserve. Going forward, CPI trends could influence the market’s direction.