The Dow Jones Industrial Average reached a new all-time high on Thursday, closing at 50,285.66, up 276.31 points, or 0.6%. The broader market rebounded from early losses as oil prices declined, alleviating inflationary pressures. The S&P 500 rose 12.75 points, or 0.2%, to 7,445.72, while the Nasdaq Composite edged up 22.74 points, or 0.1%, to 26,293.10.
Oil prices have been the dominant influence on market sentiment recently, overshadowing corporate earnings. Brent crude briefly climbed above $109 a barrel before sliding 2.3% to settle at $102.58. The drop eased concerns that rising energy costs would stoke inflation and push bond yields higher, which can make stocks less attractive. U.S. crude oil settled at $96.35, according to Reuters. "Oil is down and below $100, and that's a good thing," said Adam Sarhan, chief executive at 50 Park Investments in New York. He noted that investors remained optimistic about stocks even as markets tracked headlines on the Iran conflict and any signs of diplomatic progress.
IBM was the standout performer, surging 12.5% to $252.97 after the U.S. Commerce Department announced it would provide $1 billion to help launch Anderon, a new quantum-chip venture in New Albany, New York. IBM will also contribute $1 billion. The chip foundry will produce chips, including for external buyers. The news lifted other quantum computing stocks, with Rigetti Computing jumping 30.6% and IonQ adding 12.3%. Reuters reported that D-Wave, Rigetti, and Infleqtion will each receive around $100 million from a $2 billion government plan. Quantum computing relies on qubits instead of traditional bits, but the sector still faces significant technical challenges, such as high error rates.
Nvidia fell 1.8% to $219.51, despite reporting strong first-quarter revenue of $81.62 billion, beating profit forecasts, raising its second-quarter revenue outlook above estimates, and announcing an $80 billion buyback plan. Jacob Bourne, an analyst at eMarketer, said Nvidia "delivered another beat." However, some investors are questioning how long the AI boom will last, as competitors like Google, Amazon, and AMD develop their own chips.
In other corporate news, Ralph Lauren jumped 13.9% on better-than-expected profit and sales. Walmart dropped 7.3% after issuing a lower profit outlook. Airlines rallied as oil prices slipped, with American Airlines adding 4.9% and Southwest Airlines rising 2.7%, according to the Associated Press.
The Federal Reserve remains in focus as economic signals are mixed. Initial jobless claims fell by 3,000 to 209,000 for the week ended May 16, coming in below the 210,000 expected by economists surveyed by Reuters. Matthew Martin, senior U.S. economist at Oxford Economics, said the labor market still looks stable enough for the central bank to hold policy steady. Meanwhile, S&P Global's flash U.S. manufacturing Purchasing Managers' Index rose to 55.3 in May, the highest since May 2022. A reading above 50 indicates growth, but the increase was partly driven by companies building up inventories to avoid shortages and higher prices linked to the war. Chris Williamson of S&P Global noted that the economy may struggle to achieve annualized second-quarter growth above 1%.
Thursday's relief rally could quickly unwind if the Iran conflict drags on. Oil prices may rise again, keeping inflation firm and pushing Treasury yields higher. That scenario would pressure small caps first, but expensive AI stocks could also suffer. Some investors are already questioning whether heavy data center spending in the sector is outpacing profits. The Dow is at a new high, and the S&P 500 is just below its own record heading into Friday. Traders are now watching whether oil prices stay low, whether Nvidia's post-earnings move drags on the AI group, and whether IBM's quantum news sticks. U.S. markets are closed Monday for Memorial Day.
