US stocks hit record highs to kick off a "super week": leading semiconductor giants releasing their earnings, can "AI expanding the labor force cake" become a new growth narrative?

Note that investors officially kicked off a new week after experiencing a strong start to May on Friday and the earnings reports of five companies from the "tech seven giants" last week. In a busy week filled with labor market data and another wave of key first-quarter earnings reports, there is still much to look forward to. The S&P 500 closed up 0.3% last Friday, accumulating nearly 1% for the week overall; the tech-heavy Nasdaq index closed up 0.9% on Friday, accumulating 1.1% over the past five trading days. Both indices closed at all-time highs on Friday. The Dow Jones Industrial Average fell 0.3% on Friday, but still accumulated a 0.5% gain for the week. US-Iran tensions show signs of peace The prospects of the resumption of shipping in the Strait of Hormuz and progress in US-Iran agreements boosted market sentiment, causing oil prices to fall alongside the US dollar, with little change in gold prices. US President Trump stated over the weekend that the US would begin guiding non-conflicting ships through the Strait of Hormuz starting Monday. Trump also described discussions with the Iranian government as "very positive," following Tehran's response to Washington's latest proposal to end the war. Despite the uncertainty of the conflict still existing, these measures may pave the way for smoother energy flows and potential agreements. The latest news has added momentum to the month-long stock market rally. Traders mostly set aside concerns about the economic consequences of the conflict, as signs of corporate profit resilience drove the US stock market to its best month since 2020. Efforts to turn the fragile ceasefire into lasting peace, combined with signs of a strengthening US economy, have led to the S&P 500 rising for the fifth consecutive week. Key events ahead In terms of economic data, all eyes will be on the April employment report released on Friday. Following months of volatile employment data (including the addition of 178,000 jobs in March), economists are predicting relatively weak job growth this month, adding only 60,000 jobs. Investors will also welcome the Institute for Supply Management (ISM) business conditions data on Tuesday, ADP and Challenger-Gray-Christmas employment data on Wednesday, and the University of Michigan Consumer Confidence Index (market sentiment indicator) on Friday. On the earnings front, major semiconductor manufacturers Lattice Semiconductor Corporation (LSCC.US) will report earnings on Monday, AMD (AMD.US) on Tuesday, and Arm on Wednesday, providing investors with another perspective on the state of AI in the trade. Also worth noting are Palantir (PLTR.US), media company Paramount Pictures, Danish pharmaceutical giant Novo Nordisk A/S Sponsored ADR Class B (NVO.US), and a range of other major companies reporting earnings. Earnings growth shows the economy is likely to "thrive" rather than just "get by" While the US may be on the brink of war, it's hard to find too many signs in the US stock market. The S&P 500 and tech-heavy Nasdaq indices hit all-time highs multiple times in the past week. Microsoft Corporation (MSFT.US), Amazon.com, Inc. (AMZN.US), Meta Platforms (META.US), and Alphabet Inc. Class C parent company Alphabet (GOOGL.US) have raised their AI spending plans from $670 billion to nearly $725 billion. Earnings outside the tech sector are also strong. Capital.com analyst Kyle Roda said, "US earnings season shows companies continue to generate huge profits," "The market continues to price in a peaceful end to the Middle East conflict, believing the Fed will largely 'ignore' the energy crisis rather than respond by raising rates, and earnings growth not only survives the energy shock, but thrives against this backdrop," Roda said. Adam Tuenquist, Chief Technical Strategist at LPL Financial, pointed out that so far, not only has earnings performance largely exceeded expectations, but even in the face of weak survey-based economic data, companies' statements have been largely more constructive than expected. Indeed, the tech sector continues to provide much of the market's momentum. But UBS Group AG's US stock chief David Rafkovitz pointed out that, in addition to the "tech seven giants" and companies like Broadcom Inc. (AVGO.US) and Micron Technology Inc. (MU.US), the other 491 stocks in the S&P 500 index are also expected to provide robust performance and growth. "The macro drivers of the bull market are still there," Rafkovitz said. Semiconductor stocks' first-quarter earnings on the way In the big year for large tech stocks, the strong earnings reports of five companies from the "tech seven giants" further enhance investors' confidence in AI trade, especially as spending by the world's largest companies is expected to continue to soar. This week, investors will see another piece of the puzzle: the semiconductor industry that supports the AI craze. Lattice Semiconductor Corporation will report first-quarter results on Monday, followed by AMD on Tuesday and Arm on Wednesday. If the "tech seven giants" provide a buyer's perspective, semiconductor design is the beacon of supply-side construction of AI. While other sectors may falter due to the impact of the Iran war, the industry has been a bright spot for the stock market. The Philadelphia Semiconductor Index surged over 40% in April, marking its best monthly performance since February 2000, and continued the record rally driving AI trades. Advanced Micro Devices Inc. rose 70% in the month before its earnings release. Lattice rose 25%, and Arm rose 40%. Steve Sosnick, Chief Strategist at Interactive Brokers Group, Inc. Class A, pointed out the industry's risk of a potential pullback due to its high performance. But he also added, "If key components of the semiconductor index continue to deliver positive surprises...it's hard to bet against it." "Expanding the labor cake with AI" Perhaps the biggest question surrounding artificial intelligence is how much it will impact the US labor market. The answer varies depending on who you ask, as AI may render many white-collar workers obsolete, or there may be nothing to worry about. Investors will receive more data this week to help answer this question, with the employment report on Friday being the headline of the week. If the pattern of alternating job market gains and losses over the past 10 months continues, the expected addition of 60,000 jobs on Friday could actually indicate a decline in employment for the month, making it difficult for investors to understand. Nevertheless, economists believe the data points in the right direction, with solid performances expected on Friday. Andrew Husby, Senior Economist at Far Bank, said that weekly and daily data from ADP show "signs of acceleration," with initial jobless claims falling to their lowest level since 1969 on Thursday, and in more AI-affected industries, the "sluggish hiring" has not translated into widespread unemploymenta sign of "expanding the labor cake with AI." Husby wrote, "We suspect that positive labor market outcomes are underestimated, although we also recognize a high degree of uncertainty in situations where political risks at GEO Group Inc continue to evolve." Ahead of the Friday jobs report, investors will also receive JOLTS job vacancies, quits, and layoffs data on Tuesday; ADP private sector employment data on Wednesday; and job cuts reports from career transition company Challenger, Gray & Christmas on Thursday, making it a data-intensive week for labor market data. "The economy is not a zero-sum game, AI tools will not simply replace fixed-supply workers and the tasks they perform," Husby said. "Instead, forward-looking expectations for stronger economic opportunities and performance will create more demand at present, wealth effects will drive spending, investment will rise, which in turn will more demand for labor," he said.