Tech-Led Rally Pushes Markets to New Highs While Earnings Momentum Accelerates

US stocks were mostly positive last week with a majority of the upside driven by technology. The S&P 500 and Nasdaq were both higher for this reason (both have higher weighting in tech versus any other sector) and both on a four week winning streak and closing the week at new all-time highs. Small caps (Russell 2000 index) have participated in the rally, higher for the fifth straight week, although the performance has not been as strong and they remain about 1% from new highs.

News flow regarding the US and the war in Iran continue to be pretty volatile. After a rocky start to the week as tankers were fired at and Trump claimed a breach of ceasefire and threatened more attacks, he ultimately extended the ceasefire again citing Iran’s “fractured” government. At the same time the blockade in the Strait of Hormuz continues and ships are still not moving through the Strait in fear, helping push oil up over 12% for the week and back near $100/barrel.

The week ended on a better tone after reports said Iran’s foreign minister would head to Pakistan for the next round of negotiations.

As mentioned, the rally from the March 27 low has been driven by technology, more specifically, any company related to artificial intelligence. Semiconductors have been the most notable area of strength – the semiconductor index is on an impressive 18-day winning streak, up a staggering 45% over that period. Semiconductors are reaping the benefits because of the billions in capex companies are spending on AI as the data centers they go into are what AI is powered by.

Texas Instruments and Intel, both being up over 20% last week, were two examples of how AI-driven demand has helped propel the sector higher after reporting much better earnings and providing solid forecasts.

One of the big questions is whether there is still room to run for stocks. As mentioned the last two weeks (see here), earnings growth expectations are strong and as we move through first quarter earnings season, analysts revisions have been higher, a not so typical trend (earnings typically get revised lower). Analysts’ earnings growth expectations now stand at +19.0%, up from +16.0% just two weeks earlier.

As Texas Instruments and Intel previewed for us, earnings growth is expected to be the strongest in the technology sector, driven by the AI buildout. As seen in the chart below by JPMorgan, the tech sector is expected to drive over half the earnings growth this year, followed by financials which arguably could be seeing some of that growth because of technology and AI (dealmaking benefits financials who help underwrite and finance deals).

The fact most the growth is technology could help explain why the market has gone back to being so concentrated. We have noted many times over the past several years that much of the market upside has been driven by a small number of stocks (more specifically Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta, and Tesla, the 7 stocks that make up the “Magnificent 7”).

Bloomberg reported more than half the recent rally (gains of 13% from March 30 lows) have been generated from just seven companies, and the names might sound familiar – they include the same 7 above except switching chipmaker Broadcom for Tesla. These also happen to be the seven largest companies in the S&P 500. Together, these stocks have added roughly $4 trillion in market value over this period.

Bloomberg’s chart below (and interactive chart in the article here) illustrates how narrow the market has been over the past month and shows what stocks made up the share of S&P 500 performance since the March 30 low. For example, you can see Nvidia’s 22.1% increase made up 13.2% of the S&P 500’s gain.

As we move to this week, several of these companies are scheduled to report first quarter financial results, along with about one-third of the S&P 500, making it the busiest week of earnings season. Aside from that, the Federal Reserve holds its third policy meeting of the year, and most likely Chairman Powell’s last meeting as Chair of the Fed.

US attorney Jeanine Pirro said on Friday she will be closing the investigation into Powell relating to renovation costs at the Fed building, removing a key obstacle to the confirmation of the next Fed Chair Kevin Warsh.



Week in Review:

It was a mostly positive week for stocks with the S&P 500 and Nasdaq recording their fourth consecutive week of gains and ending at new all-time highs. The four major US indexes finished as follows: Nasdaq +1.50%, S&P 500 +0.55%, Russell 2000 +0.36%, and Dow -0.44%. Treasuries were lower for the week despite a rally on Friday – the 2-year Treasury yield rose 8 basis points to 3.79% while the 10-year yield rose 6 basis points to 4.31%. The dollar index increased 0.44% with gold down 2.79%. Bitcoin was relatively unchanged for the week. Oil rose 12.58%, back near $100/barrel over back and forth headlines regarding the Iran situation. 

Recent Economic Data



• Retail Sales: Retail sales in the US grew at the fastest pace in a year, boosted by higher gasoline prices, but also reflecting the resiliency of the consumer. Sales increased 1.7% in March with only one (miscellaneous stores) of the 13 categories seeing a decline in sales in the month. Gasoline sales surged 15.5%, as gas prices increased nearly $1/gallon in March, while vehicle sales increased 0.5%. Excluding these two volatile categories, retail sales grew a solid 0.6%. Furniture stores, general merchandise, and online sales were each up over 1.0% in the month. Retail sales have increased 4.0% from a year ago, and 4.2% excluding food and gasoline sales. After accounting for inflation (0.9% in March and 3.3% over the 12 months), retail sales grew 0.8% in the month however only 0.7% from a year ago.

• Jobless Claims: The number of jobless claims the week ended April 18 was 214,000, an increase of 6,000 from the prior week with the four-week average relatively unchanged at 210,750. The number of continuing claims increased slightly to 1.821 million while the four-week average of continuing claims was also relatively unchanged at 1.812 million. 

Company News



• Apple: Apple announced Monday afternoon that current executive and head of hardware engineering, overseeing development of Apple’s flagship products like the iPhone, iPad, Watch, and others, will become the next CEO of the company when current CEO Tim Cook steps down September 1 after 15 years as head of the company. After the change, Cook will become executive chairman of the Board.

• Marvell Technology: Shares of Marvell rose another 6% last Monday after The Information reported Google is in talks with the company to develop two new chips for running AI models more efficiently. The report says one chip is a memory processing unit designed to work with and complement Google’s existing TPU (tensor processing unit - developed with Broadcom) and the other is a new TPU built specifically for inference/AI models. The report adds Google is looking to diversify from Broadcom and Nvidia’s expensive chips.

• Spirit Airlines: The Trump administration is reportedly close to a deal to rescue Spirit Airlines, who is struggling with working out a deal with lenders as it navigates through bankruptcy. Discussions have included a $500 million loan to Spirit in return for warrants that would give it a chance to become a significant shareholder in the company, according to the WSJ.

• T-Mobile: Bloomberg reported Deutsche Telecom is evaluating a full combination with T-Mobile. Deutsche Telecom already has a 53% stake in T-Mobile. The report said Deutsche is discussing creating a new holding company that would make a stock bid for both Deutsche and T-Mobile. The combined company would be jointly owned by the company’s current shareholders and would list on the US and European exchanges.

• Microsoft: Bloomberg obtained a memo sent by Microsoft that said it will be offering voluntary buyouts, which the company called voluntary retirement program, to a portion of its workforce including senior directors and those whose years of employment plus their age add up to 70+. It says it is part of a broader shift by the company to alter its performance systems and how it awards bonuses. Details of the buyouts will not be released until next month.

• Meta: Meta said to its employees it will start cutting jobs and will close about 6,000 open roles as it looks to increase efficiencies and offset its significant spending on AI. According to a memo reviewed by Bloomberg, the job cuts are expected to total around 8,000 and are expected around the end of May with an additional round of cuts expected later in the year.

• Merger & Acquisition Deals: Eli Lilly agreed to acquire biotech company Kelonia Therapeutics for $7 billion in cash in attempt to expand its cancer pipeline. Roofing, waterproofing, and building products distributor QXO has agreed to acquire TopBuild, a major distributor and installer of insulation and related products, for $17 billion. Rare Earth miner USA Rare Earth agreed to acquire Brazilian miner Serra Verde for $2.8 billion in cash. 

Other News



• Defense Production Act: President Trump invoked the Defense Production Act, allowing him to sign a number of presidential memorandums providing federal funds for a number of energy projects in attempt to help offset the impacts of rising oil prices (form the Iran war) and electricity costs (from the surge in data centers used to run AI). The Act was created during the Cold War in attempt to boost production of things for national security purposes.

• Kevin Warsh Confirmation Hearing: The nominee for the next Fed Chair, Kevin Warsh, had his hearing in front of the Senate Banking Committee last week where he stressed he would run the central bank independently and he is not and has not committed to cutting interest rates like Trump has been pushing for. Democrats pressured him on his personal finances and his ties to billionaire investor Stanley Druckenmiller and the conflict of interests. Warsh said he would divest his assets when he is confirmed. On policy, he reiterated his stance that the Fed has become too reliant on the balance sheet and interest rates should be the primary tool in monetary policy (as opposed to the balance sheet as we have seen with quantitative easing the past two decades). No vote is scheduled yet, but follow-up questions are due April 23. The largest risk at this point is the timing of confirmation with Powell’s term up May 15. 

Did You Know...



Tax Refunds:

Latest IRS data through April 10 shows there have been 113,623,000 tax returns processed for the 2025 tax year, 2.3% lower than the same period last year, out of the 164 million expected. While the number of refunds processed has been lower, the amount that has been refunded is 16% higher than last year, equaling $36.49 billion more returned to taxpayers than last year. The average amount refunded is $3,397, compared to $3,055 last year. Some analysts have said this may have contributed to the strong retail sales report for March which showed consumers spent a better than expected 0.6% more in the month. Survey says about 60% of consumers plan to use the higher tax refund within a month of receiving it. A majority of the larger tax refunds are due to changes made by Trump’s One Big Beautiful Bill Act passed last July with about 50% of tax returns filed including one of Trump’s “signature campaign policies”, according to Treasury Secretary Scott Bessent. These include deductions for tip income, overtime pay, seniors, and auto loan interest. 

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