The S&P 500 (^GSPC) crossed 7,000 for the first time in history this week, closing at 7,022.95 on Wednesday before pushing to 7,041.28 on Thursday. Futures are pointing higher Friday as President Trump confirmed progress on ending the Iran war. According to reports, the Strait of Hormuz is officially open for business, further unleashing market gains. After taking investors on a roller coaster ride, the S&P 500 (^GSPC) has surged more than 3.3% for the week, erasing the correction that briefly knocked it nearly 10% below its January record. The broader market index is also higher YTD, up about 3%.
SPDR S&P 500 ETF Trust (NYSEARCA:SPY) gained 3.2% over the past week, with the VIX falling to around 18, well inside normal territory after spiking to nearly 26 earlier this month.
S&P 500 Gainers
United Airlines (Nasdaq: UAL) is soaring by more than 10% to $105 per share amid merger rumors involving American Airlines that have hit the market. Not to be outdone, Southwest Airlines (NYSE: LUV) is tacking on 7% amid a wider sector rally.
Peace Talks Drive the Rally
The primary catalyst is the prospect of the Iran war winding down. Trump confirmed he spoke with Lebanese President Joseph Aoun and Israeli Prime Minister Benjamin Netanyahu, announcing a 10-day ceasefire beginning at 5 p.m. ET, and the next round of U.S.-Iran talks could happen “probably, maybe, next weekend,”, with the war “very close to over.” Regional officials told the AP that the U.S. and Iran had an “in principle agreement” to extend a ceasefire and allow for more diplomacy.
Oil is pricing in the de-escalation. WTI crude dropped nearly $5 to around $90 in Friday premarket trading, while Brent crude futures were down more than 3%. Elevated oil was the primary inflation threat hanging over the market. Brent remains well above its roughly $70 price from before the war, so the market is not declaring victory yet, but the reversal has begun and stocks have taken notice.
Defense stocks are moving in reverse. Lockheed Martin (NYSE:LMT | LMT Price Prediction) slipped about 3% over the past week and RTX (NYSE:RTX) fell roughly 4% as the geopolitical risk premium began to deflate. Boeing (NYSE:BA) dropped about 2% on Thursday alone, though its commercial aviation recovery story remains intact with a $682 billion backlog. Boeing also announced a hiring spree in which it’s adding over 100 workers.
Netflix Disappoints on Guidance
Netflix (NASDAQ:NFLX) is the session’s most visible drag, with shares falling about 11% in early Friday trading after Q1 earnings disappointed on forward guidance. The quarter itself was solid: revenue of $12.25 billion beat estimates and grew 16% year over year, and net income ballooned to $5.28 billion, boosted by a $2.8 billion termination fee from Warner Bros. But Q2 revenue guidance of roughly $12.574 billion came in softer than expected. Co-founder Reed Hastings announced he will not seek re-election to the board in June after 29 years. The advertising business remains strong, with the ad-supported tier representing over 60% of sign-ups in ads markets and advertiser count up 70% year over year.
Altman’s Conflict Emerges
OpenAI CEO Sam Altman’s personal investments are drawing scrutiny. Altman is one of Helion’s largest backers, having personally invested $375 million in the fusion startup’s 2021 funding round. Reports indicate OpenAI is in advanced talks to purchase electricity from Helion, raising questions about the line between Altman’s fiduciary duties at OpenAI and his personal interests. Altman has stepped down from Helion’s board, but the overlap remains a topic of debate.
The Iran Ceasefire Is the Market’s Next Test
The 10-year Treasury yield sits near 4.29%, a moderate level that is not threatening equity valuations the way the 4.58% peak seen last year did. The next catalyst is whether the Iran ceasefire holds and whether formal peace talks produce a durable agreement. If oil continues to retreat toward pre-war levels, inflation fears ease further and the S&P 500’s path to extending its record run stays open. The next round of U.S.-Iran talks is the key date to track.
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