S&P 500 Index Edges Closer to New Record Highs Amid Robust Labor Market

US Stocks Reach Record Highs Amid Labor-Market Strength and Geopolitical Tensions

The US stock market continued its upward trend, pushing the S&P 500 towards record highs as investors remain optimistic about the resilience of the world's largest economy despite the ongoing energy shock triggered by the Iran war.

The advance has put the S&P 500 on track for its sixth straight week of gains, fueled by speculation that solid growth will continue to power Corporate America. This is evident in the near 10% jump in a gauge of chipmakers since last Friday, driven by a revival of the artificial-intelligence trade. In contrast, oil prices are headed for a weekly drop.

Investors are closely monitoring the latest economic data to assess the impacts of the war on the labor market. The US has reported a second consecutive month of job growth in April, marking the first back-to-back advance in nearly a year. The jobless rate has remained steady.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The solid payrolls report overshadowed data showing consumer sentiment fell in recent weeks to a fresh record low due to concerns about the impact of inflation on personal finances and buying conditions.

The market resilience can be attributed to the fact that stock prices follow earnings, and at least for now, they are growing too quickly for investors to ignore. According to data compiled by Bloomberg, about 82% of the S&P 500's companies have beaten first-quarter profit estimates.

Despite the labor-market strength, the Federal Reserve is likely to remain on hold for now, allowing the oil price spike to play itself out. Money market pricing continues to suggest that the Fed will keep rates steady this year.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

The US is expecting Iran to respond to President Donald Trump's plan to end the war imminently, following recent clashes that threatened to further fracture a ceasefire. Iran has given no indication whether it will accept Trump's plan, which proposes that the Islamic Republic reopen the Strait of Hormuz and the US end a blockade on ports. The nation is expected to give an answer on Friday, according to Secretary of State Marco Rubio.

Investors remain cautious, but the labor-market strength has kept the market momentum intact. As Mark Hackett at Nationwide noted, "Momentum — both in price action and earnings revisions — has remained the dominant force driving markets higher."