Stocks rallied for a second straight week, driven by easing geopolitical tensions after a U.S.–Iran ceasefire. As of Friday’s close, the S&P 500 is now within about 2% of its all-time highs, with broad participation across markets. Last week, the Nasdaq gained 4.7%, the S&P 500 rose 3.6%, and small- and mid-cap stocks also moved higher.

The biggest driver this week was a sharp drop in oil prices. The GSCI Crude Oil index closed down over 13% lower, which helped ease inflation concerns and boost investor sentiment. However, uncertainty remains as negotiations continue and key issues, like the Strait of Hormuz and regional conflicts, remain unresolved.

Leadership came from growth and AI-related sectors. Communication services and consumer discretionary both rose about 5.8%, with strong gains in mega-cap tech.

Amazon surged over 13% and Meta climbed nearly 10%, fueled by continued AI investment and demand for computing power. That said, Bloomberg reported at the beginning of the month that almost half of the US data centers planned for construction this year have been either delayed or canceled with electrical equipment and the electric grid that supports these large facilities unable to keep up with the demand.

On the macro side, inflation data was mixed. Headline CPI came in hot due to energy, but core inflation remained more contained. These inflation measures have been a key component in determining Fed interest rate policy. Consequently, the Fed continues to maintain a cautious tone, signaling that rate cuts are still possible but may be pushed further out depending on inflation progress.

Looking ahead, earnings season kicks off with expectations for modest beats and cautious guidance. Markets will also be watching geopolitical developments closely, as well as key economic data, to determine whether this rally can continue.