The S&P 500 Hit a Record High This Week. Here Is What Is Actually Driving It.

Something unusual happened in US markets over the past few trading days. Stocks did not just recover from their war-related lows. They went past them entirely. The S&P 500 closed above 7,100 points for the first time in history on Friday April 18, capping its third straight week of gains and its longest winning streak since 1992. The Dow Jones surged 868 points in a single session. The Nasdaq hit its first record high since late October.

The headline trigger was Iran's foreign minister announcing on April 17 that the Strait of Hormuz was fully open to commercial shipping. Oil dropped more than 9% on the day and WTI crude settled at $83.85 per barrel. Traders took that as a signal that the worst of the energy crisis might be behind them.

But there is more to this story than the ceasefire. About 10% of companies in the S&P 500 had reported quarterly earnings by the end of the week, and 88% of them delivered profit results that beat analyst expectations. Corporate America is still earning well. Banks have been notably strong, with State Street rising 2.5% and Fifth Third Bancorp up 1.7% after both reported better numbers than forecast. AI-related stocks also helped, with renewed confidence that demand for computing power and data centre investment has plenty of room to run.

Not everyone is convinced the rally reflects reality. Kristina Hooper, chief market strategist at Man Group, warned that the market's swift recovery might be overlooking risks that have not gone away. Analysts at Interactive Brokers described the mood as a "feeding frenzy," driven more by the fear of missing out than by fundamentals. The full impact of the energy shock on consumer spending, inflation, and corporate costs has not yet shown up in most company earnings.

The S&P 500 has now jumped more than 12% since its recent bottom on March 30. That is an extraordinary move in less than three weeks. Whether it is justified will depend on whether the Strait stays open and whether oil prices keep falling toward pre-war levels, which were around $73 per barrel.

Key Metrics: S&P 500 close (April 18): 7,126.06, an all-time high

Dow Jones gain (April 18): 868.71 points or 1.8%

S&P 500 earnings beat rate: 88% of early reporters

WTI crude (April 18 close): $83.85 per barrel, down 12% on the day