The SPDR S&P 500 ETF Trust (SPY) is poised for another strong session on Wednesday, following record closes for both the S&P 500 and Nasdaq on Tuesday. Early trading saw S&P 500 futures advance 0.32%, while Nasdaq 100 futures climbed 0.81%, buoyed by a combination of renewed momentum in artificial-intelligence chip stocks and optimism surrounding a potential U.S.-Iran peace deal.
AI Chip Rally Drives Tech Momentum
Advanced Micro Devices (AMD) surged nearly 18% in premarket trading after the company raised its outlook, signaling that demand for AI infrastructure remains robust. This positive forecast ignited a rally across the semiconductor sector, with Intel (INTC) adding 6%, Arm Holdings (ARM) climbing 11%, and Qualcomm (QCOM) advancing roughly 4%. The surge in chip stocks provided a significant boost to the technology-heavy SPY, which closed Tuesday at $723.77 with $740.5 billion in assets under management.
Market Broader Gains and Sector Performance
The S&P 500 index itself notched a new high on Tuesday, rising 0.81% to close at 7,259.22, while the Nasdaq Composite gained 1.03%. All 11 S&P 500 sectors ended in positive territory, led by technology and materials. This broad-based rally helped lift SPY, even as chip stocks dominated the action. The technology sector's weight in SPY remains substantial, with State Street reporting information technology at 35.47% of the fund on May 4. Major holdings include Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL), all of which benefit from market-cap weighting.
Geopolitical Optimism and Economic Data
Adding to the positive sentiment were reports that the U.S. and Iran are nearing a one-page agreement aimed at ending hostilities, as reported by Axios. Although Reuters could not independently confirm the story, the news helped lift both stocks and bonds. Kyle Rodda, senior financial market analyst at Capital.com, noted that U.S. messaging appeared to calm investor nerves, with Washington signaling it is not interested in renewing hostilities. However, analysts caution that if talks break down, oil prices could bounce back, reigniting inflation concerns and limiting the Federal Reserve's flexibility.
On the economic front, the Institute for Supply Management's services index edged down to 53.6 in April, with the prices-paid measure remaining elevated at 70.7—the highest since late 2022. Labor data from the JOLTS report showed a mixed picture: March job openings fell by 56,000 to 6.866 million, while hiring surged by 655,000 to 5.554 million. These steady labor conditions have reinforced expectations that the Fed will hold interest rates steady through the remainder of the year.
Earnings Season and Analyst Insights
First-quarter earnings have been a bright spot, with S&P 500 companies on track for a 28% year-over-year profit increase—the fastest growth rate since 2021, according to Tajinder Dhillon, head of earnings research at LSEG. Tom Hainlin, investment strategist at U.S. Bank Wealth Management, described the results as "coming in pretty strong." Matt Britzman, senior equity analyst at Hargreaves Lansdown, highlighted that AMD's story is shifting into "a broader compute opportunity" as AI workloads grow in complexity, suggesting that AI spending may expand beyond graphics chips into servers, CPUs, and the full data-center stack.
Other Major ETFs and Market Outlook
SPY is not alone in tracking the rally. BlackRock's iShares Core S&P 500 ETF (IVV) closed at $726.98 on May 5 with $805.9 billion in net assets, while Vanguard's S&P 500 ETF (VOO) also remains a heavyweight. As cash trading begins Wednesday, traders are focused on whether the S&P 500's record close will hold, with fund fees taking a backseat to broader market direction.
