The S&P 500 and Nasdaq posted record closing highs on Thursday after reports that the U.S. and Iran reached a draft agreement to extend their ceasefire for 60 days, while investors digested key inflation data.
The Dow Jones Industrial Average also eked out small gains to finish at another closing high. The agreement still needs President Trump's approval, sources said.
"Traders are on a hair trigger with the back-and-forth on deal news, and have been leaning long to avoid getting trampled by a better-than-expected outcome. The harder part is that the inflationary forces may not abate as fast as markets want," said Jamie Cox, managing partner at Harris Financial Group.
Economic data showed U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices amid the Iran war.
Meanwhile, U.S. GDP for the first quarter was revised lower to a 1.6% annualized increase, with momentum expected to slow this quarter.
The Dow rose 24.69 points (0.05%) to 50,668.97, the S&P 500 gained 43.27 points (0.58%) to 7,563.63, and the Nasdaq added 242.74 points (0.91%) to 26,917.47.
The S&P 500 healthcare index posted strong gains. Eli Lilly advanced 4% after CVS Health said it would restore the drugmaker's weight-loss injection Zepbound to its coverage and add its newly approved obesity pill Foundayo.
Tech shares also moved higher. Microsoft gained 3.5% after reports that the company would release a new coding model next week. Marvell Technology rose 3% after UBS raised its target price.
Snowflake shares soared 36% after the data analytics firm lifted its annual product revenue forecast and announced a five-year AI infrastructure deal worth $6 billion with Amazon Web Services.
Renewed confidence in AI and earnings growth momentum have underscored the recent rally despite Middle East tensions, which have increased inflationary expectations.
"Markets continue to look through these risks because the global economy and corporate earnings remain relatively resilient," said Jitania Kandhari, deputy CIO at Morgan Stanley Investment Management.
While the S&P 500 trades at roughly 21 to 22 times forward earnings versus a trailing 10-year average of 19.7 times, investors are less concerned because earnings expectations are rising faster than stock prices, Kandhari said.
Among other movers, Dollar Tree climbed almost 18% after lifting its full-year profit forecast, while Best Buy rose 15.8% after forecasting second-quarter sales above estimates.
Drone companies rose after reports that the Trump administration was in talks to fund drone firms. Shares of Unusual Machines surged almost 11%.
Advancing issues outnumbered decliners by a 1.74-to-1 ratio on the NYSE and a 1.8-to-1 ratio on the Nasdaq.
The S&P 500 posted 18 new 52-week highs and 10 new lows, while the Nasdaq recorded 127 new highs and 65 new lows.
