The S&P 500 and Nasdaq Composite reached all-time highs last week, and investor sentiment remained buoyant on Friday following a 10-day ceasefire agreement between Israel and Lebanon. In a related development, Iran announced the full reopening of the Strait of Hormuz, a critical passage for global energy shipping, which had been affected by the ongoing conflict. This news contributed to a surge in U.S. equities, with all three major indexes up over 1%, while the Russell 2000 small-cap index outperformed with a 2.7% gain.

The market’s positive reaction underscores a growing investor confidence that inflation and interest rates may stabilize, as evidenced by a 1.4% drop in 10-year Treasury yields and a significant 10.3% decline in Brent crude oil prices. However, the S&P 500’s elevated price-to-earnings ratio of 28 suggests that continued upward momentum will depend on forthcoming earnings reports from major tech companies.

As earnings season approaches, the focus will shift to the performance of the “Magnificent Seven” tech stocks. Strong results could provide the necessary fuel for the rally to persist, while any disappointments may lead to a reassessment of current valuations.

StoxFeed tracks this as a market signal: Oil prices are responding to OPEC decisions and geopolitical tensions

Source: fool.com