From War Panic to a Five Month High -- What Flipped the S&P 500 This Week

If you checked your portfolio Friday afternoon and did a double take, you were not alone. The S&P 500 just wrapped up its best weekly performance since November, gaining about 3.5% on the week despite slipping a little on Friday to close things out. The Nasdaq did even better, ripping nearly 4.7% for the week. The Dow was up around 3.6%. All three major indexes are now coming off a stretch that a lot of people on Wall Street genuinely did not see coming two weeks ago.

So what happened? How did we go from a five week losing streak and war breaking news scrolling across every financial terminal in the country to the strongest weekly gain in five months? Let us break it all down because there is actually a lot going on here and it matters for where the market goes next.

Where We Were Before This Week

To understand why this week was such a big deal, you have to remember how bad the last several weeks were. Starting in late February, the U.S. entered a military conflict with Iran that sent global markets into a tailspin. Oil prices shot through the roof. The Strait of Hormuz, which is basically the chokepoint that roughly 20% of the world's oil supply flows through, got disrupted. Energy stocks went on an absolute tear while everything else got crushed. Tech, which makes up a massive chunk of the S&P 500, got hit especially hard.

The S&P 500 had been in a five week losing streak before things started to reverse. Consumer sentiment fell to record lows. The Fed was signaling that rate hikes might actually be back on the table to deal with a possible inflation spike from the oil shock. It was not a pretty picture. A lot of people were genuinely worried we were heading into a stagflationary scenario, which is basically the worst case for markets: high inflation combined with slowing growth. Nobody wants that, and the data was starting to whisper that it could happen.

The Ceasefire Changed Everything

The week flipped entirely on Wednesday, April 8th. President Trump posted on Truth Social announcing he was suspending U.S. attacks on Iran for two weeks to allow peace talks to happen. That single announcement sent the Dow ripping 1,325 points higher in a single session, its best day since April 2025. The S&P 500 jumped 2.51% on Wednesday alone, also its best single day performance in about a year. The Nasdaq surged 2.8% that same day.

Oil prices absolutely collapsed in response. West Texas Intermediate crude futures fell more than 16% on Wednesday, marking the biggest single day drop in oil since April 2020. That is a staggering move. For context, oil had been hovering around or above $100 per barrel throughout the conflict. Watching it drop that hard that fast was a massive signal to the market that the worst case scenario for inflation was starting to look less likely.

Peace talks were scheduled for this weekend in Pakistan, and traders spent the rest of the week trying to figure out how long the good vibes would last. The ceasefire is still described as fragile by basically everyone covering it. Clashes between Israel and Hezbollah in Lebanon were still happening. The Strait of Hormuz was not fully reopened yet. So even in the middle of the best week since November, there was still a ceiling on optimism because nobody was ready to call this thing fully resolved.

Tech Led the Charge

As soon as the geopolitical pressure started to ease, money rotated hard back into technology. This makes sense when you think about it. Tech stocks, especially the ones tied to AI infrastructure spending, had been some of the biggest losers during the conflict. Microsoft, which had been one of the worst performers in Q1, started bouncing. Alphabet, Meta, Amazon, and Nvidia all surged on Wednesday when the ceasefire got announced.

Nvidia in particular is worth watching here. TSMC, which manufactures chips for Nvidia and basically every other major semiconductor company, reported strong results earlier in the week. That gave a boost to the whole chip sector right as the market was already in rally mode. Nvidia ended the week up meaningfully, and Broadcom also saw significant gains. The basic logic on semis is simple: when geopolitical risk goes down, supply chain concerns ease up, and investors feel better about piling back into the high growth AI trade.

The S&P 500 crossed back above both its 50 day and 200 day moving averages on April 8th, which is a technically significant moment. Those two averages had been a ceiling for the index during the losing streak. Punching back through them on high volume sent a bullish signal that a lot of traders were watching for.

The CPI Data Was a Mixed Bag

Friday brought the March Consumer Price Index report, and this is where things got a little complicated. Headline CPI jumped 0.9% in March compared to February, the biggest monthly jump since June 2022 when Russia's invasion of Ukraine was sending energy prices spiraling. On a year over year basis, CPI came in at 3.3%, a notable acceleration from 2.4% the month before. Gas prices surged 21.2% in March alone, the largest monthly increase since 1967. That is not a typo.

But here is the thing that kept markets from completely panicking about the inflation print. Core CPI, which strips out food and energy prices, came in at just 0.2% month over month, below the 0.3% that analysts were expecting. Shelter costs and food prices stayed in check. So the inflation spike was almost entirely driven by oil and gas, which are exactly the categories most directly tied to the conflict. If the ceasefire holds and oil prices continue to come down, the market is betting that this CPI print is a one time shock rather than the start of a new inflation cycle.

That bet is not guaranteed to pay off. Consumer sentiment data also released this week showed expectations for inflation over the next 12 months jumping to 4.8%, the highest since August 2025. People are still scared about prices even if the core data looks okay. The Fed is watching all of this very carefully, and the minutes from their last meeting showed policymakers are genuinely split on whether rate hikes might be necessary. That uncertainty is not going away anytime soon.

What This Means for Traders Right Now

The big picture takeaway here is that the market just staged a meaningful recovery, but it is doing so in the middle of a situation that is still very much unresolved. The S&P 500 is now only about 2.3% off its all-time high from January 27, 2026. That is actually pretty remarkable given how brutal the last six weeks have been. Yardeni Research, one of the more closely watched macro research shops on Wall Street, lowered their U.S. recession probability estimate from 35% to 20% after the ceasefire was announced. That is a meaningful shift in how the pros are thinking about the economy right now.

But the risks are real and worth taking seriously. The ceasefire is described everywhere as fragile. Peace talks are happening this weekend in Pakistan and the outcome could move markets on Monday morning. If negotiations break down, expect oil to spike again and everything tech and risk related to get hit. Bank earnings also kick off Monday with Goldman Sachs reporting before the open, followed by JPMorgan, Citigroup, and Wells Fargo on Tuesday. Those reports are going to tell us a lot about how the financial system handled Q1, which was easily one of the messiest quarters in recent memory. Markets could swing hard in either direction depending on what the big banks have to say about loan quality, trading revenues, and forward guidance.

For active traders, the setup heading into next week is genuinely interesting. Volatility, as measured by the VIX, has come way down from the panic highs we saw during the worst of the conflict. The VIX closed Friday around 19, which is pretty tame historically speaking. Lower volatility usually means options get cheaper, which can create some clean setups for traders who like playing earnings moves or positioning around macro events. The bank earnings and the ongoing ceasefire news flow are going to be your two biggest catalysts to watch.

The question everyone is asking is whether this is the real bottom or just a relief rally. The honest answer is nobody knows yet. What we do know is that the market just had its best week since November, the technicals flipped bullish for the first time in weeks, and there are a few massive potential catalysts right around the corner that could either extend the run or send things right back down.

Stay sharp, keep your position sizes in check, and keep an eye on what comes out of those Pakistan talks this weekend. If a lasting peace deal comes together, the next leg up in this market could be significant. If it falls apart, buckle up.