The stock market finished the week modestly higher with the S&P 500 and Nasdaq hitting fresh record highs. The domestic market benefited from strong earnings, especially in mega-cap tech, despite a cautious macro backdrop. As FactSet reported Friday, we are effectively more than halfway through the earnings season as it relates to the S&P 500 Index with 63% having reported. And of those companies, 84% have reported beats to their EPS estimates.

Alphabet surged on strong results, while Meta and Microsoft declined despite all three companies beating expectations. This dynamic highlights how investors are becoming more sensitive to the forward-looking guidance and the scrutiny placed on AI-related spending.

Sector performance was mostly positive. Communication Services and Energy led, while defensive sectors like Consumer Staples and Utilities also saw gains, signaling some rotation. Technology finished mostly flat overall, despite pockets of strength in semiconductors and software. Materials was the notable standout in negative territory as the sector felt the pressure of the higher energy costs.

As evidenced by the resumption of fresh all-time highs in the overarching S&P 500 index last week, the domestic market has continued to remain resilient to the geopolitical turmoil in the middle east. That said, Crude oil prices traded back up over $100 a barrel going into the weekend as tensions have begun to flare back up amidst the US Naval blockade.

In other economic news, Federal Reserve Chairman, Jerome Powell stated that he plans to stay on the Fed board after his chair term ends in a couple weeks’ time. The new Chair, Kevin Warsh will begin his term on May 15th. Last Wednesday also marked the last FOMC meeting under Powell’s leadership and another meeting without any change to the Fed Funds Rate. It also reflected the most divided Fed Committee since 1992. Of the 12 voting members, one voted to lower rates and three others pushed back against the inclusion of as easing bias in the statement at this time.

Generally, the three dissenting members against the easing bias expressed varying levels of concerns regarding inflation accelerating as the FOMC has been unable to return to the 2% inflation target. Consequently, the CME Group’s Fed Watch tool shifted last week to not just reflect prolonged rates at the current level but also the prospect of higher rates as soon as October.