Stocks Extend Rally as AI Momentum Builds and Geopolitical Fears Ease

The market pushed higher for a second consecutive session, with the S&P 500 (+0.6%), Nasdaq Composite (+0.8%), and Dow Jones Industrial Average (+0.6%) advancing despite a cautious start driven by lingering geopolitical uncertainty.

Equities spent much of the morning under pressure as reports indicated that tanker traffic through the Strait of Hormuz remained largely stalled and that Israel continued strikes against Hezbollah in Lebanon. Those developments raised concerns that the fragile ceasefire with Iran could unravel, particularly after renewed threats from Tehran.

Sentiment shifted around midday following a Reuters report that Israeli Prime Minister Benjamin Netanyahu instructed aides to begin direct negotiations with Lebanon. While Israel signaled that military operations would continue in the interim, the prospect of diplomacy helped stabilize markets, prompting a rebound in equities and a pullback in oil prices from earlier highs.

Crude oil futures ultimately settled $3.49 higher (+3.7%) at $97.89 per barrel but finished well below intraday peaks above $102. That reversal weighed on the energy sector (-1.3%), which gave back early gains to close lower.

Sector participation was broadly positive, with nine of eleven S&P 500 sectors finishing higher. The consumer discretionary sector (+2.3%) led the advance, fueled by strong performance from Amazon. Shares surged after CEO Andy Jassy reiterated aggressive AI investment plans, including a $25 billion data center expansion in Mississippi.

Meta Platforms also contributed to the bullish tone, gaining after expanding its multibillion-dollar AI infrastructure partnership with CoreWeave. The renewed focus on hyperscaler spending helped reignite enthusiasm across the AI ecosystem.

That momentum extended into industrial and infrastructure-linked names tied to data center buildouts. Corning, Caterpillar, and GE Vernova all traded to record highs, lifting the industrials sector (+1.0%).

Technology shares posted more measured gains, with the information technology sector (+0.4%) supported by strength in semiconductors. Sandisk delivered another outsized move higher, while NVIDIA and Intel helped push the PHLX Semiconductor Index up 2.1%.

However, the rally came with notable internal rotation. Software names faced renewed selling pressure, with ServiceNow and Palantir Technologies among the laggards, dragging the broader software ETF lower.

Defensive sectors such as consumer staples sector (+0.9%) and utilities sector (+0.8%) held onto early gains, reflecting some residual caution even as risk appetite improved.

Outside of large caps, the Russell 2000 (+0.6%) and S&P MidCap 400 (+0.3%) followed a similar upward trajectory, reinforcing the session’s constructive breadth.

Overall, the session marked another step forward for equities as geopolitical tensions showed tentative signs of easing and AI-driven investment themes regained traction. Attention now turns to the upcoming CPI report, which will serve as a critical test of whether inflation pressures are beginning to broaden beyond energy and into the core economy.

Our FTinvest 11 model portfolio slipped 0.16% to close at 985.00, giving back a small portion of the previous session’s strong gains. The portfolio remains within close range of its recent highs, though still below the all-time high of 1,039.51, with short-term movement reflecting mild consolidation.

Based on the start-of-year level of 928.18, FTinvest 11 is now up approximately +6.12% year-to-date, maintaining solid performance despite minor day-to-day fluctuations. The portfolio continues to demonstrate resilience, supported by its disciplined, value-driven approach as it navigates early Q2 market conditions.