Updates after market open

By Niket Nishant and Utkarsh Hathi

May 1 (Reuters) - Wall Street's main indexes extended their rally on Friday, with the S&P 500 and the Nasdaq reaching record highs driven by the impetus from their biggest monthly gains in years.

Sentiment was boosted after a report from Iranian state media said Tehran had sent its latest proposal for negotiations with the United States to Pakistani mediators on Thursday.

Friday's session wraps up a heavy week of Big Tech earnings and economic data. Analysts now see S&P 500 first-quarter earnings growth at 27.8% - the fastest pace since the fourth quarter of 2021 and up from 16.1% last week, according to LSEG IBES data.

Markets will watch if the rally holds as markets enter May, historically the start of a weaker 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.

While earnings were largely solid, some investors have voiced concerns about tech giants' AI spending spree. Doubts about the sustainability of some software business models have also surfaced, prompting reassessment of portfolios.

"The disruptive potential of AI across software, services, financials and other industries has created uncertainty about the durability and terminal value of certain business models," said Peter Vanderlee, portfolio manager at ClearBridge Investments.

Economic data released on Thursday also raised fears that the equity buying frenzy could be due for a reality check.

Although U.S. economic growth regained momentum in the first quarter, consumer spending, the economy's main growth engine, decelerated, while the personal savings rate declined, suggesting households tapped into savings to support outlays.

Besides, the figures take into account just one month of the disruption stemming from the Middle East war. With shipping through the Strait of Hormuz having come to a standstill, oil prices may become a bigger burden, especially as the support from tax refunds in the first quarter tapers off.

U.S. manufacturing activity held steady in April, data on Friday showed, but supplier delivery performance worsened as the Middle East conflict disrupted shipping in the Strait of Hormuz, boosting prices for raw materials and other inputs to a four-year high.

At 09:54 a.m. ET, the Dow Jones Industrial Average .DJI rose 148.14 points, or 0.30%, to 49,800.28, the S&P 500 .SPX added 40.71 points, or 0.56%, to 7,249.72, and the Nasdaq Composite .IXIC gained 193.21 points, or 0.78%, to 25,085.52 - fresh records for the Nasdaq and the S&P 500.

Seven of the 11 main S&P sectors were in the green, with the S&P 500 information technology sector .SPLRCT gaining the most with a 1.5% rise.

The S&P 500 .SPX ended April with its biggest monthly percentage gain since November 2020, while the Nasdaq Composite .IXIC advanced the most since April 2020. The Dow's monthly rise was its biggest since November 2024.

UPBEAT APPLE FORECAST LIFTS SHARES

Apple AAPL.O jumped 4.8% after robust demand for its flagship iPhone 17 and MacBook Neo led the company to forecast solid sales growth for the fiscal third quarter.

Among energy companies, Exxon Mobil XOM.N and Chevron CVX.N reported first-quarter profit above estimates. Shares of both companies were flat.

Software companies climbed after Atlassian TEAM.O lifted its annual forecast. The enterprise software maker surged 27.7%.

Peers Salesforce CRM.N and ServiceNow NOW.N added 3.2% and 1.8%, respectively. Datadog DDOG.O rose 5.8% and Workday WDAY.O gained 2.7%.

Other major movers included Roblox RBLX.N, which fell 18.4% following a cut in its annual bookings forecast. Reddit RDDT.N gained 7.8% after an upbeat quarterly revenue forecast.

Advancing issues outnumbered decliners by a 1.09-to-1 ratio on the NYSE and by a 1.16-to-1 ratio on the Nasdaq.

The S&P 500 posted 27 new 52-week highs and five new lows, while the Nasdaq Composite recorded 75 new highs and 22 new lows.