Global stock markets surged as investors anticipated a potential de-escalation of the conflict with Iran, while corporate profits continued to climb. The S&P 500 index reached an all-time high for the fourth consecutive day, marking its seventh straight gain and its ninth consecutive winning week, a streak not seen since 2023. This surge occurred as companies within the S&P 500 reported an overall profit growth of 28% for the most recent quarter, according to FactSet data.
Capital's Harvest
Japan's Nikkei 225 index rose 1.8% to 65,814.96, while Australia's ASX 200 increased by approximately 1%. On Wall Street, the S&P 500 climbed 0.2% to 7,580.06, the Dow Jones Industrial Average gained 0.7% to 51,032.46, and the Nasdaq composite added 0.2% to 26,972.62. In May, the S&P 500 saw a 5.1% increase, bringing its year-to-date gain to 10.7%.
Major corporations reported significant gains, contributing to the market's upward trajectory. Microsoft shares rose 5.4%, and Broadcom gained 4.7%. Dell Technologies experienced a substantial 32.8% surge after reporting profits that exceeded expectations and raising its financial outlook, attributing this to robust demand for AI computing. Angelo Kourkafas, senior global strategist at Edward Jones, noted that "The rally has been largely tech-led and supported by resilient earnings."
The Cost to Labor
While corporate balance sheets swelled, the ongoing conflict has continued to extract a heavy toll from working people. The war has disrupted the flow of oil shipments through the Strait of Hormuz, a critical chokepoint for roughly a fifth of the world's oil and natural gas. This disruption has driven up gasoline prices and the cost of a wide range of goods, fueling inflation and tightening the economic squeeze on consumers and small businesses.
Brent crude for August delivery, despite a 1.7% fall to $91.12 per barrel, remained significantly above its late February price of $70 per barrel, before the war began. Benchmark U.S. crude oil for July delivery also fell 1.7% to $87.36. Prices were already on an upward trend prior to the conflict due to the lingering effects of tariffs.
Reports this week indicated that inflation accelerated in April to its highest level in three years, as measured by a metric preferred by the Federal Reserve. This persistent rise in the cost of living has led to a noticeable decline in consumer confidence, reflecting the increasing economic pressure on households.
The State's Management of Crisis
The U.S. and Iran are reportedly engaged in discussions to extend a ceasefire, a development that has been framed as easing pressure on oil prices. This state-level intervention aims to stabilize a key input cost for global capital, rather than addressing the underlying causes of conflict or the mechanisms of surplus extraction that benefit from it.
The Federal Reserve has maintained its benchmark interest rate, monitoring inflation data. The central bank is expected to continue holding rates steady at its next meeting in June and throughout the year. While cutting rates could potentially lower borrowing costs for businesses and stimulate the economy, the Fed's primary concern remains the risk of exacerbating inflation, a dilemma that highlights the limitations of monetary policy in resolving structural economic contradictions.