Record-Breaking New York Stock Market: Why It Remained Unshaken by Iran and Inflation

On May 28, US equity markets hit record highs again, with the S&P 500 climbing 0.6% to 7,563.63 and the Nasdaq rising 0.9% to 26,917.47. The Dow edged up just 0.05%, but overall risk-on sentiment led by technology and consumer stocks prevailed.

The biggest market mover was April’s Personal Consumption Expenditures inflation report, the Federal Reserve’s preferred gauge. Core PCE rose 3.3% year-over-year and headline PCE was 3.8%, both in line with expectations but well above the Fed’s 2% target. First-quarter GDP growth was revised down to 1.6%, reinforcing concerns of a slowing economy. Nonetheless, investors viewed the data as “high inflation within expected ranges,” dovetailing with recent Fed comments that interest rates will likely remain unchanged for now and averting a scenario of a sharp rate spike and market sell-off.

On the earnings front, Snowflake surged more than 30% after announcing a $6 billion cloud and AI deal with Amazon and delivering results that exceeded forecasts, reigniting enthusiasm for growth stocks. Dollar Tree, Kohl’s and Hormel Foods also beat consensus estimates and rallied, while Salesforce slipped despite solid results amid worries about intensifying competition. Strength across the technology, consumer staples and discretionary sectors reinforced the perception of a “fundamentally supported rally.”

Geopolitical risks also lingered. Brent crude jumped about 2% intraday on heightened tensions after Iran-launched missiles, only to give back most gains following reports that the US and Iran had tentatively agreed to extend a 60-day truce. While energy and transport shares initially felt the strain, hopes for an extended ceasefire and expectations that full-scale conflict would be avoided fueled a relief rally in equities.

For investors, persistently high inflation makes an early Fed rate cut unlikely; instead, corporate earnings and ample liquidity are underpinning the current rally. Given that volatility could spike on further Iran-related developments or inflation surprises, a defensive stance—balancing increased exposure to growth stocks with allocations to geopolitically sensitive sectors like energy and defense, and maintaining a healthy cash cushion—remains advisable.