S&P 500, Nasdaq advance, set for weekly gains after earnings-heavy week

May 1 (Reuters) - U.S. stocks moved higher on Friday after turning the page on their biggest monthly percentage gains in years, boosted by robust earnings and a dip in crude prices, with developments in the Middle East rumbling in the background.

All three major U.S. stock indexes were higher, with tech strength putting the Nasdaq out front. The S&P 500 and the Nasdaq are on course to notch new record closing highs, and log their sixth consecutive weekly advances.

As May begins, markets embark on what is historically a weak six-month stretch for stocks. Since 1945 through April 2026, the S&P 500 has gained an average of about 2% from May to October, according to data from Fidelity. That compares with an average gain of about 7% from November through April.

Wrapping up a momentous week for corporate earnings, in which reporting companies accounted for more than two-fifths of the S&P 500's total market capitalization, analysts now see aggregate first-quarter earnings growth of 27.8%, year-on-year, according to LSEG I/B/E/S.

Five of the companies in the Magnificent Seven group of artificial intelligence-related stocks reported this week, and investors paid close attention to the timing and extent to which huge investments in the nascent technology are starting to pay off.

That's an 11.7 percentage point increase from where the estimate stood a week ago, and marks the biggest earnings growth since the fourth quarter of 2021.

Of the 314 companies that have posted results, 83% have beaten earnings estimates, and 78% reported better-than-expected revenues, according to LSEG.

"Earnings are above expectations," said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management in Minneapolis. "That's a pretty good foundation for stock prices."

"The concern that investors have about large tech companies and how much money they're spending is going to be a recurring feature from quarter to quarter," Hainlin added. "It's not that it's bad that the tech companies are investing $650 billion this year in artificial intelligence, but they're going to want to return on an investment."

GEOPOLITICS, CRUDE PRICES AND THE ECONOMY

Progress toward a peaceful resolution to the U.S.-Israeli war on Iran appeared stalled, with closure of the Strait of Hormuz putting upward pressure on energy prices and stoking inflation worries.

But front-month crude futures eased after Iran was reported to have submitted a fresh proposal for negotiations with Washington.

"Investors are pricing out how long they expect that supply disruption to last, and then differentiating who's got the most sensitivity to that disruption," Hainlin said.

Economic data showed U.S. factory activity expanded in April for the fourth consecutive month, but the prices-paid component - an inflation predictor - jumped to its hottest level in four years, according to the Institute for Supply Management.

The Dow Jones Industrial Average rose 10.43 points, or 0.02%, to 49,662.57, the S&P 500 gained 42.03 points, or 0.58%, to 7,251.04 and the Nasdaq Composite gained 282.63 points, or 1.14%, to 25,175.25.

Among the 11 major sectors in the S&P 500, technology stocks were enjoying the biggest percentage gains, while energy shares were down the most.

Apple shares advanced 3.5% after the company provided a solid sales forecast, touting strong demand for its flagship iPhone 17 and the MacBook Neo.

Software companies climbed after Atlassian lifted its annual forecast. The enterprise software maker surged 28.6%.

Peers Salesforce and ServiceNow added 3.9% and 2.6%, respectively.

Roblox fell 17.0% following a cut in its annual bookings forecast. Reddit jumped 13.6% after an upbeat quarterly revenue forecast.

Exxon Mobil's quarterly profit was hit by Middle East disruptions, while Chevron beat earnings expectations but overall profit marked its lowest level in five years. The supermajors dipped 1.3% and 1.5%, respectively.

Advancing issues outnumbered decliners by a 1.38-to-1 ratio on the NYSE. There were 473 new highs and 56 new lows on the NYSE.

On the Nasdaq, 2,952 stocks rose and 1,660 fell as advancing issues outnumbered decliners by a 1.78-to-1 ratio.

The S&P 500 posted 43 new 52-week highs and 12 new lows while the Nasdaq Composite recorded 121 new highs and 40 new lows.

(Reporting by Stephen Culp; Additional reporting by Niket Nishant and Utkarsh Hathi in Bengaluru; Editing by David Gregorio)

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