AI-Fueled Rally Puts S&P 500 on Track for Eighth Weekly Gain

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(Bloomberg) — US equity futures rose as investors struck an upbeat tone ahead of a long holiday weekend, with optimism fueled by hopes for resolution of hostilities in the Middle East, resilient economic data and relentless enthusiasm for artificial intelligence-linked trades.

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Contracts on the S&P 500 rose 0.3% at 8:30 a.m. in New York, putting the benchmark on track for an eighth straight week of gains, its longest winning streak since 2023. Nasdaq 100 futures added 0.4% as traders continued piling into AI beneficiaries and broader technology themes. The Cboe Volatility Index, or VIX, hovered near its lowest level since early February, a sign of market calm despite uncertainty around the Iran conflict.

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Brent crude rebounded, though prices remained lower for the week as investors grew more confident that the US and Iran may avoid a wider escalation. 

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Equity investors have largely shrugged off concerns that disruptions to energy flows could reignite inflation pressures. Instead, they have focused on signs of economic resilience and the growing breadth of AI-related spending across corporate America.

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“Global bond markets are signaling a repricing of risk — spanning stickier inflation and expansionary fiscal policy amidst the threat of a prolonged Strait of Hormuz disruption,” said Seema Shah, chief global strategist at Principal Asset Management. “While such moves would typically challenge equities, resilient earnings powered by the formidable AI capex cycle are helping markets look beyond higher yields towards a productivity-driven growth outlook.”

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Strategists at Evercore ISI pointed to Thursday’s stronger-than-expected S&P Global PMI reading on manufacturing activity as further evidence of “US exceptionalism,” citing domestic energy production, AI capital expenditures and wealth creation as key drivers.

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Corporate activity has also supported sentiment. Announced stock buybacks and cash takeovers have already surpassed $1 trillion globally this year, according to EPFR Global data.

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The AI trade continued to dominate markets. A basket of stocks tied to Anthropic’s ecosystem has surged 56% since the start of March, while the equal-weighted S&P 500 has been little changed. 

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In corporate news, IMAX Corp. shares soared in premarket trading, after the Wall Street Journal reported the large-screen theater company is exploring a sale and has approached entertainment companies as potential buyers. US-listed Chinese shares slipped after Beijing announced plans to penalize three cross-border brokerages.

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Among individual movers, Workday Inc. jumped 12% in premarket trading after posting first-quarter results that beat expectations. Alcoa Corp. shares rose after UBS raised its recommendation on the aluminum producer to buy from neutral on aluminum prices caused by the war. 

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Consumer-focused gainers include Cava Group Inc., which gained in premarket trading after Argus Research Corp. raised its recommendation on the restaurant chain to buy from hold on restaurant growth. And Sweetgreen Inc. shares jumped after JPMorgan raised its recommendation on the restaurant chain to overweight from neutral on new products and an improving balance sheet.

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Investors are also watching Washington for fresh policy signals. Federal Reserve Governor Christopher Waller is scheduled to speak later Friday, while the final May reading of University of Michigan consumer sentiment is due at 10 a.m. in New York.

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—With assistance from Neil Campling.

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