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The market staged a remarkable comeback last week, with major indices rocketing to record highs fueled by optimism surrounding a potential peace deal with Iran. The S&P 500 breached the 7,100 mark for the first time, while the Nasdaq extended its winning streak to an impressive 13 consecutive sessions, its longest since 1992. For the week, the S&P 500 surged 4%, with the tech-centric Nasdaq outperforming with a 6% gain. The Dow Jones Industrial Average also climbed 1.7%.
This rapid ascent marked a significant turnaround. Strategists at Barclays noted that the S&P 500 navigated from a near-correction territory—down approximately 9% from its all-time peak—back to record levels in a mere 11 trading days. This swift rebound from such a substantial drawdown is the fastest observed since at least 1990, underscoring the dramatic shift in market sentiment.
While investor sentiment was undeniably buoyed by the prospect of de-escalation in the Iran-U.S. conflict, the market’s rally was further supported by a robust earnings season from major financial institutions and a notable resurgence in the embattled software sector.
**Geopolitical Thaw and Market Relief**
The week began with the familiar anxiety of investors dissecting the impact of overseas developments on their portfolios. Early in the week, negotiations in Islamabad faltered, leading to President Donald Trump’s announcement of a blockade on maritime traffic to and from Iran’s ports. Despite this seemingly negative news, the market responded with surprising strength, climbing higher.
A subsequent round of negotiations between Washington and Tehran on Tuesday offered a glimmer of hope. By Wednesday, President Trump’s statement to Fox Business, suggesting the conflict was “very close to over,” sent stocks soaring. The market continued its upward trajectory with the announcement of a ceasefire deal between Israel and Lebanon, propelling markets to another record high. The week culminated with Iran declaring the Strait of Hormuz “completely open” on Friday.
This potential end to geopolitical tensions could unlock further gains for stocks that had been suppressed by the conflict. Homebuilders, for instance, saw a boost, with Home Depot climbing 3.6% on Friday. The prevailing sentiment is a forthcoming rotation into beaten-down sectors that were negatively impacted by the war. Furthermore, with the Federal Reserve now having the potential to lower interest rates, there’s an expectation of a renewed focus on underperforming assets.
**Software’s Resurgence Amidst AI Anxiety**
The software sector, which had been a significant laggard this year due to concerns about artificial intelligence startups disrupting market share, emerged as a star performer. The iShares Expanded Tech-Software ETF (IGV) recouped some of its losses, rising nearly 14% for the week, though it remains down approximately 20% year-to-date.
Microsoft experienced a significant weekly gain of 14%. For the software giant, a strategic shift could be beneficial: reallocating compute capacity from its AI assistant, Copilot, towards its cloud platform, Microsoft Azure. This would leverage Azure’s existing infrastructure and market position more effectively.
Cybersecurity leader CrowdStrike saw an 11.9% increase. The narrative around AI is increasingly viewed as a tailwind for cybersecurity firms. As AI models become more sophisticated, the complexity of the threat landscape is expected to grow, thereby increasing demand for advanced security solutions. CrowdStrike, alongside peers like Palo Alto Networks, is poised to benefit from this trend. Indeed, the strategy may involve transitioning investment from Palo Alto Networks to further bolster holdings in CrowdStrike.
Salesforce, another major software player, jumped 10.4%. While the company’s seat-based business model could face headwinds from AI advancements, there’s optimism surrounding management’s ability to navigate these challenges. Investors will be keenly awaiting CEO Marc Benioff’s commentary during the upcoming earnings release in May for insights into their strategic direction.
**Consumer Resilience Shines Through**
Despite the market volatility driven by the recent conflict, bank earnings revealed a remarkably resilient consumer. Results from consumer-facing businesses, particularly credit card operations, painted a positive, albeit cautiously optimistic, picture.
JPMorgan reported that consumer spending growth in the quarter surpassed the pace set in the previous year. Credit card spending volume saw a robust year-over-year increase of 9%, with delinquency rates remaining relatively stable. JPMorgan CFO Jeremy Barnum highlighted the continued resilience of “consumers and small businesses.”
Wells Fargo’s credit card division also demonstrated strong performance. New credit card account openings surged by nearly 60% year-over-year, according to CFO Mike Santomassimo. The bank’s consumer banking and lending division recorded a 6.6% revenue increase in the first quarter. Prior to the surge in energy prices, CEO Charlie Scharf noted that while gasoline spending saw a modest increase as a percentage of total debit and credit card spending, consumers did not curtail spending in other categories.
However, Wells Fargo’s overall report was somewhat overshadowed by a revenue miss, marking the second consecutive quarter of disappointing revenue performance. This led to a downgrade of the stock to a hold-equivalent rating.
In contrast, other large banks navigated the first quarter of 2026 more smoothly. Club holding Goldman Sachs, along with Bank of America, JPMorgan, and Morgan Stanley, exceeded expectations on both revenue and earnings. Goldman Sachs, in particular, is highlighted as a strong performer due to its robust dealmaking business, which continues to be a profitable engine for the firm.
The market’s sharp recovery, driven by geopolitical de-escalation and strong corporate earnings, signals a renewed sense of optimism. The resilience of the consumer and the potential for a shift in Fed policy further bolster the case for continued market upside, particularly in sectors poised to benefit from evolving technological landscapes and a less volatile global environment.
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