Stocks continue to be volatile. That is especially true for the Dow Jones Industrial Average, where one or two stocks can push the average sharply higher or lower. That was the case recently when Caterpillar, a component of the wildly followed Dow, jumped 80 points. Casual market watchers were being misled by the media that were all agog that the Dow rose 790 points.

As for the market one must marvel at the resilience of investors and their willingness to buy each time stocks show weakness. Investors can be a fickle group, buying one day and selling the next with equal enthusiasm. Why so bullish? Think AI.

Anthropic, a private AI company, reported 80-fold growth in the first quarter on an annual basis. It’s surely the fastest growing company of all time. But they need more compute power to meet demand, which is why semiconductor stocks have soared. Semiconductors make up a record 42 percent of the S&P 500 tech sector, which is more than double from 2022.

There have been some spectacular profits in AI companies. Alphabet (Google) is the second largest company behind Nvidia. Normally such a large company would have average profit growth. But Alphabet reported an 81 percent increase in net income!

Meanwhile, U.S. GDP (gross domestic product) came in at $31.22 trillion for the first quarter. National debt stood at $31.27 trillion. That’s the first time since 1946 that debt was higher than GDP.

After responding to strong earnings, what can move the market higher from here? The outlook for the price of oil will be a catalyst for months or years. OPEC and international organizations have said as much because so much of the infrastructure in the Gulf has been destroyed. I should think Halliburton will have a full order book for years.

That leaves another catalyst for the market’s next move. The outlook for GDP growth and with it interest rates. Until recently it was more or less a given that interest rates will fall. The only questions being by how much and when. Now some Fed governors are saying that unless inflation falls the next move in rates might be higher. That would be a surprise that is not factored into prices today. Thanks to AI spending, I expect a strong economy in the second half. That will also put upward pressure on rates. Stand by.

David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.