US stocks extend rally as earnings season unfolds

Investors are turning their attention to a busy week of corporate earnings, as US stock markets stage a sharp rebound and climb to record levels despite lingering geopolitical concerns.

Hopes of easing tensions between the United States and Iran have helped fuel a strong rally in recent weeks.

This has pushed major indices to fresh highs.

The benchmark S&P 500 closed at a record level on Wednesday for the first time since January 27, while the Nasdaq Composite also reached its first all-time high close since October 29.

Market participants are now looking ahead to first-quarter earnings, which are expected to provide strong support to equities.

Nearly one-fifth of S&P 500 companies are scheduled to report results in the coming week.

Oil prices and inflation remain key risks

Despite the rally in equities, oil prices have remained elevated.

US crude traded around $94 a barrel on Thursday, compared to $67 in late February before the conflict escalated.

As cited in a Reuters report, Michael Mullaney, director of global markets research at Boston Partners, warned that sustained high oil prices could lead to higher inflation and Treasury yields, which may weigh on equities.

Rapid recovery surprises market watchers

The speed of the market rebound has surprised analysts.

After falling 9% from its January peak following the start of the conflict, the S&P 500 has rebounded 11% since March 30, closing above the 7,000 level for the first time.

Data from Bespoke Investment Group showed that the index had never previously returned to record highs in just 11 trading sessions after a 5% to 10% decline.

Jim Reid, head of macro and thematic research at Deutsche Bank, said, “The velocity of this ascent has been nothing short of astonishing,” as cited in a Reuters report.

Tech stocks lead the rally

Megacap technology stocks, which initially declined during the market sell-off, have played a key role in the recovery.

Companies such as Alphabet and Meta Platforms have performed strongly, while the broader tech sector has outpaced the market.

The Nasdaq recorded gains for 12 consecutive sessions, marking its longest winning streak since 2009.

Key earnings and economic data in focus

Tesla is set to report earnings on Wednesday, becoming the first of the “Magnificent Seven” companies to release quarterly results.

Other major firms reporting include Boeing, Intel and Procter & Gamble, while Microsoft, Alphabet and Meta will follow next week.

Overall, S&P 500 earnings are expected to rise about 14% year-on-year in the first quarter, based on LSEG IBES estimates.

Meanwhile, investors will also watch upcoming economic data and policy signals.

Kevin Warsh, US President Donald Trump’s nominee to lead the Federal Reserve, is scheduled to testify before Congress on Tuesday.

Markets are currently not expecting interest rate cuts this year due to inflation risks linked to the conflict.

Retail sales data for March will also be closely monitored.

Rising fuel prices, which have reached $4 per gallon, could impact consumer spending.