Wall Street celebrated record gains last week driven by hopes of ending a costly conflict with Iran, even as the underlying economic data revealed American consumers and small businesses bearing increased burdens from war-driven inflation—highlighting a growing disconnect between financial markets and Main Street realities.
Stocks rocketed to record highs last week on hopes of a peace deal with Iran, with the S&P 500 closing above 7,100 for the first time and the Nasdaq completing its longest-winning stretch since 1992, 13 days of gains. For the week, the S&P 500 jumped 4%, the Nasdaq rose 6% and the Dow Jones Industrial Average increased 1.7%.
Barclays strategist Venu Krishna said in a note to clients that the S&P 500 went from near correction territory, down about 9% from its all-time peak, back to an all-time high in just 11 trading days. He said that was the fastest move to record levels from a bottom of at least 9% since at least 1990. He said the quick reversal was largely the result of investors pricing in an end to the Iran-U.S. conflict, but Wall Street was also digesting solid bank earnings and a comeback in the beat-up software sector.
Geopolitical Volatility Drives Market Swings
The week started just as it had every Monday since the U.S. attacked Iran in late February, with investors trying to figure out how the latest overseas developments could affect their portfolios. Negotiations in Islamabad broke down over the weekend, prompting President Donald Trump to announce a blockade of all maritime traffic in and out of Iran's ports. Tuesday brought another round of negotiations between Washington and Tehran, and on Wednesday Trump told Fox Business that the war was "very close to over," which sent stocks soaring. A session later, the president announced a ceasefire deal between Israel and Lebanon, leading to another record high. On Friday, Iran declared that the Strait of Hormuz was "completely open."
Jim Cramer said there could be more gains in stocks that have been pressured by the war if the good news keeps coming. He cited homebuilders like Home Depot, which jumped 3.6% on Friday. During Friday's Morning Meeting, Cramer said he sees a coming rotation into stocks that were pressured by the war. "Now the Fed has the chance to be able to cut rates under Kevin Warsh. So, what we're seeing is a move back into things that have really lagged," he said.
Technology Sector Rebounds
Beaten-down software stocks were the biggest winners in the portfolio, with Microsoft, CrowdStrike and Salesforce the top three gainers. Software stocks have been hit this year on fears that artificial intelligence startups will eat their market share. The iShares Expanded Tech-Software ETF rose nearly 14%, recovering some of its losses, but remained down roughly 20% for 2026. Microsoft was up 14% week-to-date. CrowdStrike gained 11.9%. Salesforce jumped 10.4%.
Consumers Bear the Cost of Conflict
Bank earnings showed a healthy consumer despite war-driven market volatility throughout the last month of the quarter. JPMorgan said growth in consumer spending for the quarter was above the pace set in 2025. Credit card spending volume also went up 9% year over year, while delinquency rates remained fairly stable. JPMorgan CFO Jeremy Barnum said, "consumers and small businesses remain resilient."
Wells Fargo's credit card business was also positive, with new credit card account openings jumping nearly 60% year over year, CFO Mike Santomassimo said. Revenues from its consumer banking and lending division experienced a first-quarter revenue increase of 6.6%. Before the war-driven surge in energy prices, CEO Charlie Scharf said gas accounted for 6% of total debit card spending and 4% of total credit spending. Each of those levels rose 1%. Scharf said, "Consumers are spending more than a year ago, which includes spending more on gas, but they haven't slowed spending on everything else."
Yet this resilience comes at a cost. The data shows families are spending more on essential energy costs due to the conflict—resources diverted from other household needs or savings—while maintaining overall spending levels that may rely increasingly on credit.
Banking Sector Performance Mixed
Wells Fargo came in above earnings expectations, but management disappointed for the second quarter in a row with its revenue miss. The Club downgraded the stock to a hold-equivalent 2 rating on the release. Wall Street's other large banks weathered the first quarter of 2026 much better. Club holding Goldman Sachs, along with peers like Bank of America, JPMorgan and Morgan Stanley, beat on both the top and bottom lines. Cramer said, "The one [bank] you really want to own is Goldman because that was actually a really good quarter."
Why This Matters:
The dramatic market rally reveals how financial gains from geopolitical developments can mask the real economic pressures facing ordinary Americans. While investors celebrated peace prospects and corporate profits, the underlying data shows consumers forced to allocate more household budgets to war-inflated energy costs—a direct transfer of wealth from working families to energy markets. The characterization of consumers as "resilient" obscures the structural reality that households are absorbing higher costs for essentials while maintaining spending through increased credit use, potentially building vulnerabilities that won't appear in quarterly earnings until economic conditions deteriorate. The disconnect between soaring stock markets and the everyday financial strain documented in consumer spending patterns underscores the need for economic policies that prioritize household financial security alongside market performance.