NEW YORK, May 11 (Reuters) - The S&P 500 closed slightly higher on Monday, with AI optimism fueling upward momentum even as the earnings-driven fervor of the recent rally eased in the home stretch of reporting season and as crude prices rose, stoking inflation worries as U.S.-Iran peace negotiations stalled.
Semiconductors handily outshone other sectors as artificial intelligence-related momentum continued unabated, with chipmakers outperforming the broader market.
"The semis and AI infrastructure trade has taken on a life entirely of its own," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "And there's so much momentum and chasing to get in on some of these names that it seems almost somewhat divorced from any sort of like headline or announcement."
First-quarter reporting period is nearing the finish line, with 440 of the companies in the S&P 500 having reported. Of those, 83% have topped earnings expectations, according to LSEG IBES.
As of Friday, analysts estimated first-quarter S&P 500 earnings growth, on aggregate, of 28.6% year-on-year. That's nearly double the 14.4% first-quarter growth estimates as of April 1.
"The strength of the rally largely is a function of earnings growth, which is superb," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
"Market watchers are looking ahead to next week, when the big-box retailers report, to get a sense of if there's any change in consumer spending behavior following, you know, elevated prices at the gas pump."
But as earnings season nears the finish line, focus returns to macroeconomics and geopolitical developments.
President Donald Trump dismissed Iran's response to a U.S. peace proposal, causing crude prices to spike and stoking concerns that a prolonged conflict will keep putting upward pressure on inflation, particularly at the gasoline pump, where consumers are feeling the pinch.
On that point, investors will pay close attention to economic indicators this week, particularly the Labor Department's Consumer Price Index and the retail sales report from the Commerce Department, scanning the data for signs that the ongoing surge in energy prices is metastasizing into broader inflation or affecting consumer spending.
Producer prices and industrial output are also on this week's economic calendar.
Later this week, President Trump is due to meet his Chinese counterpart Xi Jinping in Beijing for talks covering a broad range of issues, including the Iran war, trade, nuclear weapons, Taiwan, artificial intelligence and possible extension of a critical rare earth minerals deal.
According to preliminary data, the S&P 500 (.SPX), gained 14.62 points, or 0.20%, to end at 7,413.55 points, while the Nasdaq Composite (.IXIC), gained 25.88 points, or 0.10%, to 26,272.96. The Dow Jones Industrial Average (.DJI), rose 100.46 points, or 0.20%, to 49,709.62.
Companies slated to report this week include tech networking giant Cisco (CSCO.O), and semiconductor equipment maker Applied Materials (AMAT.O), while heavyweights Nvidia (NVDA.O), and Walmart (WMT.O), are due to report later in the month.
On Monday, Intel (INTC.O), rose, building on Friday's 14% surge following a report of a preliminary chip-making agreement with Apple (AAPL.O), while peer Qualcomm (QCOM.O), jumped to a record high.
Media major Fox Corp (FOXA.O), rose after beating third-quarter revenue estimates.
Among other movers, some airline stocks slipped as rising oil prices threatened to squeeze margins.
Reporting by Ragini Mathur and Utkarsh Hathi in Bengaluru; Editing by Devika Syamnath and David Gregorio
