S&P 500, Dow Hit Records as Stock Rally Defies Risks — WSJ

Stock Market Defies Risks with Record-Breaking Rally

Investors are pouring into stocks despite a war in the Middle East, a historic energy shock, and AI worries. The S&P 500 just notched its eighth straight weekly gain—the longest streak since December 2023—while the Dow closed at an all-time high above 50,000.

Fund managers now hold 50% more stocks than their benchmarks, the most since January 2022, and they're favoring cyclical over defensive shares by the widest margin since 2018.

Earnings and Peace Hopes Fuel Optimism

A blockbuster earnings season is easing fears that profits couldn't keep up with rising stock prices. S&P 500 companies reported a 28% jump in first-quarter profits, according to FactSet. Hopes for a peace deal in the Middle East are also boosting sentiment.

Chip makers remain at the heart of the rally. Samsung surged 144% this year, Intel climbed 225%, and the semiconductor index gained 5.3% in a single week. Quantum computing stocks soared after the government announced $9 billion in grants.

Speculative Bets and Aerospace Buzz

SpaceX's mega-IPO plans lifted aerospace stocks: AST SpaceMobile rose 27%, Virgin Galactic 15%, and Rocket Lab 8.8%.

Caution Signals Emerge

Despite the euphoria, risks abound. Rising energy prices and supply constraints could reignite inflation and hurt growth. Brent crude remains up 70% this year. Walmart warned that consumers are stressed by fuel costs, and its shares fell 8.5%.

Bond yields are climbing as the Fed considers rate hikes, making stocks less attractive. Consumer sentiment hit an all-time low, and individual investor bullishness fell to 31.7%.

Yet some analysts see widespread caution as a reason the rally can continue. With stocks trading at 21 times forward earnings, down from earlier highs, and profits surging, many believe there's room to run.