Wall Street Extends Rally on Tech Strength; Middle East Deal Remains in Spotlight

Market Rally Continues: Dow, S&P 500, and Nasdaq Reach New Heights

May 29 (Reuters) - The main indexes on Wall Street extended their record run on Friday, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all on track to end the week and month higher. The rally was driven by strong earnings growth, particularly in the tech sector, and renewed optimism around artificial intelligence (AI).

Dell Leads Tech Sector Charge

Dell's shares surged 28% after the company raised its full-year profit and revenue forecasts on Thursday. The tech sector as a whole climbed 1.83%, with chip stocks leading the gains. Hewlett Packard Enterprise rose 12% and Super Micro Computer gained 10%. Among megacaps, Microsoft rose 3%.

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The three indexes hit intraday record highs, with the Dow Jones Industrial Average reaching 50,985.36, the S&P 500 at 7,581.64, and the Nasdaq Composite at 26,978.77.

Analysts Weigh In

Ohsung Kwon, chief equity strategist at Wells Fargo, attributed the rally to earnings-driven optimism around AI. He suggested investors buy and hold AI stocks and sell call options at prices much higher than the current stock price. Melissa Brown, head of investment decision research at SimCorp, noted that volume has increased over the past few weeks, indicating more people are entering the market.

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Sector Performance

The S&P 500 communications services sector fell 1.7%, with Alphabet dropping 1.8%. Consumer staples shares were weak, with heavyweights Costco and Walmart down 4.5% and 2.8%, respectively. The S&P automaker index dropped 0.8% after reports that the Trump administration wants North American-built vehicles to have 82% regional content to qualify for preferential treatment under the U.S.-Mexico-Canada Agreement.

Economic Data and Fed Outlook

U.S. economic data showed inflation increased at its fastest pace in three years in April, while GDP for the first quarter was revised lower to a 1.6% annual rise. The Fed's Kansas City President Jeffrey Schmid warned that the energy shock may not be temporary, while Vice Chair for Supervision Michelle Bowman said a persistent rise in inflation might require tighter monetary policy. Money markets expect the Federal Reserve to keep interest rates steady for the rest of the year, with expectations of a 25-basis-point hike in December.

Other Movers

Gap shares tumbled 17.5% after the apparel retailer cut its annual sales forecast, while American Eagle Outfitters dropped 12.7% after keeping its annual comparable sales forecast unchanged.