S&P and Nasdaq hit record highs, continuing remarkable recovery from war shock

By John Towfighi, CNN

New York (CNN) — A rally in stocks lifted the S&P 500 and Nasdaq Composite to fresh record highs on Wednesday, capping off a strong two-week recovery that has seen the indexes erase all losses tied to the US-Israeli war with Iran.

The S&P on Wednesday rose 0.8% to close at 7,022.95 points, an all-time high, surpassing its last record set in January. It’s a stark shift from just a few weeks ago, when the index was down roughly 9% since its January peak.

The Nasdaq rose 1.59% and closed at 24,016.02 points, a record closing high. The tech-heavy index has soared more than 15% since late March, surpassing its previous record high set in October and officially exiting the correction it entered just weeks ago.

What’s changed? Investors have leaned in to optimism about the US-Iran ceasefire, albeit fragile. A pullback in oil prices – though still elevated compared to pre-war levels – has also helped fuel the stock market rally. Wall Street is also in the midst of earnings season, and investors are enthusiastic about forecasts for corporate profits.

The S&P 500 rose 10 out of the past 11 trading sessions, gaining more than 10% across that period and putting the index up 2% since the US-Israeli war with Iran began at the end of February. The Nasdaq has gained 11 days in a row, putting it up almost 6% since the war began.

“It has been yet another V-shaped buy-the-dip recovery in the S&P 500,” Ed Yardeni, a Wall Street veteran and president of Yardeni Research, wrote in a note.

Traders have piled in to stocks on any hint that the war might be coming to an end. The Dow last week had its best day in a year and is up roughly 5% this month, rebounding after closing in correction in late March. The Dow is down 1% since the war with Iran began. The blue-chip index on Wednesday fell 72 points, or 0.15%, lagging behind the S&P and Nasdaq.

CNN’s Fear and Greed Index, a proxy for market sentiment, tumbled into “extreme fear” in March before rebounding this month and trading in “neutral” on Wednesday — a sharp reversal. Wall Street’s fear gauge, the VIX, has closed lower on 10 of the past 12 trading sessions, signaling less volatility in markets.

But “a healthy skepticism is warranted,” Craig Johnson, chief market technician at Piper Sandler, wrote in a note.

The rally in stocks “appears to be built on hope,” Johnson said, with oil prices still trading above $90 per barrel and uncertainty about the duration of the war remaining.

The rebound in stocks means 401(k) plans, individual retirement accounts and personal portfolios invested in funds that track the S&P 500 or other US stock benchmarks are recovering after a rocky few weeks.

While stocks have recouped losses, US gas and diesel prices remain elevated, straining Americans’ budgets. The enthusiasm in the stock market might not reflect people’s everyday experience in the economy.

Stocks have pushed higher this week despite the lack of an agreement during US-Iran talks in Islamabad on Saturday and President Donald Trump announcing a blockade of the Strait of Hormuz.

“The recent ceasefire between the US and Iran sparked a relief rally,” analysts at Citi wrote in a note. “However, uncertainty remains unusually elevated, especially following the US’ announced blockade of the Strait of Hormuz.”

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