By Avi Salzman

The war may not be over, but investors are betting that the worst is. That optimism was enough to lift stocks to their best weekly performance of the year and could keep the rally going in coming days.

"The market senses, rightly or wrongly, that we are moving past the peak of uncertainty," says Keith Lerner, Truist's chief investment officer. Investors could wait until the war is clearly resolved before buying, but stocks are likely to move before then. "Markets in general don't wait until everything's fully worked out," he says.

The cease-fire announced on Tuesday led to the best day for the stock market in almost exactly a year. The Nasdaq Composite, which closed up 4.7% on the week, has already exceeded its prewar levels. The S&P 500 index, up 3.6%, and the Dow Jones Industrial Average, up 3%, are both nearing those milestones -- and their all-time highs.

To be sure, the situation remains far from settled on the ground in the Middle East. The Strait of Hormuz remained effectively blocked as of Friday, with hundreds of tankers waiting to exit and Iran allowing few ships through. The oil market is in a severe shortage, sending spot oil prices to record levels, and adding to the highest inflation reading in nearly two years on Friday.

Negotiations beginning this weekend will determine how long the cease-fire will last, and whether oil prices will come back down. Investors, however, appear to have already moved on. The S&P 500 has now gained back more than 60% of the value it lost in the war-related selloff, a rebound that generally means the lows are already in, says Michael Arone, chief investment strategist at State Street Investment Management. "Historically, when you retrace this much of the decline, it's a good sign," he adds.

Arone is looking forward to earnings season, which has already kicked off for a few names in the S&P 500, but will have a more official start on Monday when big banks like Goldman Sachs Group report their numbers.

Some strategists are particularly excited about technology stocks, which started the year in the dumps but have begun to climb back. Tech names are on track to post 45% earnings growth on 27% revenue gains for the first quarter. "It's an avalanche of earnings power," says Jeff Buchbinder, chief equity strategist at LPL Financial.

Tech stocks are trading at around 23 times their expected earnings, or only a slight premium to the S&P 500. "All of a sudden I can get incredible earnings growth and revenue growth for the same multiple as the market," Arone says.

From here, the market is unlikely to move in a straight direction, and war-related headlines will continue to dominate the tape, Lerner cautions. A consistent rally during a very fragile cease-fire seems like a tenuous prospect. "It's probably a time to have a little bit more of a neutral stance, not necessarily leaning too much into risk," says Garrett Melson, a portfolio strategist at Natixis.

It's too soon to look past the war, even if the market has stars in its eyes.

Write to Avi Salzman at avi.salzman@barrons.com

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(END) Dow Jones Newswires

April 10, 2026 21:30 ET (01:30 GMT)

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