Wall Street Week Ahead: US Stock Market Set to Face Crucial Tests Amid Data Releases, Global Tensions

US Stock Market Rally to Continue Amid Strong Earnings and Economic Data

The US stock market is expected to maintain its rally in the coming week, driven by strong quarterly earnings, economic data, and developments in the Iran war. The benchmark S&P 500 index has surged more than 16% from its low in late March, with the technology-heavy Nasdaq Composite up nearly 13% on the year.

The strongest US quarterly earnings season in over four years has lifted sentiment for equities, with corporate reports expected to remain a key driver for stocks in the coming days. Next week's results include tech networking equipment firm Cisco and semiconductor equipment maker Applied Materials, with heavyweights Nvidia and Walmart due later in the month.

According to LSEG IBES data, S&P 500 earnings are on track to jump 28.6% in the quarter, indicating that corporate spending on artificial intelligence is flowing through to the results of several industries. This surge in earnings has helped to alleviate concerns about the economic impact of the Iran war and the resulting surge in energy prices.

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The rally in the US stock market has been fueled by hopes for an end to the Middle East conflict, which began in late February with US-Israeli strikes on Iran. Investors are eager to see a reopening of the Strait of Hormuz, a critical choke point for global oil supplies, and a resolution to the conflict will be top of mind for investors.

Economic data covering April, including the consumer price index (CPI) and producer prices, will also be closely watched. The CPI is expected to rise 0.6% in April, driven by a surge in gasoline prices. The core reading of the CPI, which strips out energy, will offer clearer clues for projecting the path of interest rates.

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The latest Federal Reserve meeting indicated more hawkish sentiment from several policymakers, and investors are expecting a near-term resolution to the war to alleviate concerns about inflation and interest rates. The war-related surge in energy prices has also led to a spike in gasoline prices, with the national average price topping $4.50 a gallon for the first time since July 2022.

Overall, the US stock market is expected to continue its rally in the coming week, driven by strong quarterly earnings, economic data, and developments in the Iran war.