Stocks Fall Amid Rising Middle East Tensions

The S&P 500 Index ($SPX) (SPY) on Monday closed down -0.41%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.21%.  June E-mini S&P futures (ESM26) fell -0.42%, and June E-mini Nasdaq futures (NQM26) fell -0.22%.

Stock indexes gave up an early advance on Monday and settled lower amid heightened tensions in the Middle East.  WTI crude oil prices surged more than +4% on Monday after the US and Iran exchanged fire in the Strait of Hormuz, raising inflation expectations and pushing bond yields higher.  The 10-year T-note yield rose to a 5-week high of 4.46% on Monday. 

Stocks initially moved higher on Monday, with the Nasdaq 100 posting a new all-time high.  Signs of corporate resilience are boosting optimism that AI investment will continue to fuel earnings growth.  AI-infrastructure stocks and software companies moved higher on Monday.  Stocks also found support after US March factory orders rose more than expected, a sign of economic strength.

US Mar factory orders rose by +1.5% m/m, stronger than expectations of +0.6% m/m and the biggest increase in four months.

Comments on Monday from New York Fed President John Williams were dovish and supportive for stocks when he said, "Inflation is higher this year than previously expected, so that pushes off a date of lowering interest rates, but it doesn't change the basic story that rates will need to come down at some point if inflation returns to the Fed's 2% target.

President Trump said the US will begin guiding some neutral ships trapped in the Persian Gulf out through the Strait of Hormuz.  US Central Command said it would provide military support, including guided-missile destroyers, aircraft, and drones, to ships transiting the strait. 

Heightened tensions in the Middle East are weighing on stocks.  The United Arab Emirates (UAE) said an Iranian drone attack caused a fire at the Fujairah oil industry zone on Monday, and a cargo ship from South Korea was attacked in the Strait of Hormuz.  Also, the UAE issued a missile threat warning after an oil tanker was struck by Iranian drones outside the Strait of Hormuz. The US Central Command said the US military fought off attacks from Iranian drones, missiles, and armed small boats as it facilitated the passage of two US-flagged vessels through the Strait of Hormuz.

WTI crude oil prices (CLM26) recovered from early losses on Monday and surged more than +4% as the US and Iran exchanged fire in the Strait of Hormuz.  The strait remains essentially closed, as about a fifth of the world’s oil and liquefied natural gas transits through the strait.  Goldman Sachs estimates that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, with the drawdown potentially reaching 1 billion bbl by June.

The markets are discounting a 3% chance of a -25 bp FOMC rate cut at the next FOMC meeting on June 16-17.

Earnings results thus far this reporting season have been supportive of stocks.  As of Monday, 82% of the 322 S&P 500 companies that reported Q1 earnings have beaten estimates.  Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence.  Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.

Overseas stock markets settled lower on Monday.  The Euro Stoxx 50 closed down -2.00%.  China's Shanghai Composite did not trade, with markets in China closed for the Labor Day holiday.  Japan's Nikkei Stock Average did not trade, with markets in Japan closed for the Greenery Day holiday.

Interest Rates

June 10-year T-notes (ZNM6) on Monday closed down by -15 ticks.  The 10-year T-note yield rose +6.7 bp to 4.437%.  Jun T-notes tumbled to a 4-week low on Monday, and the 10-year T-note yield jumped to a 5-week high of 4.462%.   Monday’s +4% surge in WTI crude oil prices raised inflation expectations and weighed on T-note prices.  The 10-year breakeven inflation rate climbed to a 3-year high of 2.526% on Monday. 

Monday’s stronger-than-expected US March factory orders report was bearish for T-note prices.  Also, the US Treasury on Monday said it now estimates $189 billion in net borrowing for Q2, up $80 billion from the $109 billion projected in February, which may lead to increased supply pressures as the Treasury boosts debt sales of government securities.

European government bond yields moved higher on Monday.  The 10-year German Bund yield rose +5.0 bp to 3.087%.  The 10-year UK gilt yield is not trading today, with markets in the UK closed for the May Day holiday.

The Eurozone May Sentix investor confidence index unexpectedly rose +2.8 to -16.4, stronger than expectations of a decline to -22.0.

ECB Governing Council member Peter Kazimir said an ECB rate hike in June is "all but inevitable amid a prolonged period of broad-based price increases coupled with visibly weaker growth across the Eurozone."

Swaps are discounting a 99% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

US Stock Movers

Freight operators sold off on Monday after Amazon launched Amazon Supply Chain Services, expanding its freight, distribution, fulfillment, and parcel shipping solutions to businesses beyond its marketplace sellers.  GXO Logistics (GXO) closed down more than -17%, and United Parcel Service (UPS) closed down more than -10% to lead losers in the S&P 500.  Also, FedEx (FDX) and CH Robinson Worldwide (CHRW) are down more than -9%, and Old Dominion Freight Line (ODFL) closed down more than -6% to lead losers in the Nasdaq 100.  In addition, Expeditors International of Washington (EXPD) closed down more than -5%, and JB Hunt Transport Services (JBHT) closed down more than -3%.

Home builders and supplies retreated on Monday after the 10-year T-note yield jumped to a 5-week high, which raises mortgage rates and is negative for housing demand.  KB Home (KBH) closed down more than -6%, and DR Horton (DHI) and Lennar (LEN) closed down more than -4%.  Also, Pulte Group (PHM) and Toll Brothers (TOL) closed down more than -3%, and Home Depot (HD) closed down more than -3% to lead losers in the Dow Jones Industrials.  In addition, Builders Firstsource (BLDR) closed down more than -2%.

Norwegian Cruise Line Holdings (NCLH) closed down more than -8% to lead cruise line operators lower after cutting its full-year adjusted Ebitda forecast to $2.48 billion to $2.64 billion from a previous estimate of $2.95 billion, weaker than the consensus of $2.79 billion.  Also, Carnival (CCL) closed down more than -3%, and Royal Caribbean Cruises Ltd (RCL) closed down more than -2%. 

Chipmakers and AI-infrastructure stocks moved higher on Monday to lend support to the broader market.  Micron Technology (MU) closed up more than +6% to lead gainers in the Nasdaq 100, and SanDisk (SNDK) closed up more than +5%.  Also, Western Digital (WDC) closed up more than +2%, and Seagate Technology Holdings Plc (STX) closed up more than +1%. 

Software stocks were stronger on Monday, a positive factor for the overall market.  Atlassian (TEAM), Oracle (ORCL), and Datadog (DDOG) closed up more than +4%, and Cadene Design Systems (CDNS) closed up more than +2%.  Also, Intuit (INTU), Palantir Technologies (PLTR), Adobe Systems (ADBE), and Autodesk (ADSK) closed up more than +1%.

Cryptocurrency-exposed stocks rallied on Monday as Bitcoin (^BTCUSD) rose more than +2% to a 3-month high.  Coinbase Global (COIN) closed up more than +6%, and Strategy (MSTR), Galaxy Digital Holdings (GLXY), and MARA Holdings (MARA) closed up more than +3%.  Also, Riot Platforms (RIOT) closed up +0.97%.

GameStop (GME) closed down more than -9% after offering to purchase EBay for $125 per share in a cash and stock deal.

Celcuity (CELC) closed up more than +15% after its Phase 3 trial of gedatolisib plus fulvestrant in PIK3CA mutant breast cancer patients met its primary endpoint. 

Tyson Foods (TSN) closed up more than +7% to lead gainers in the S&P 500 after reporting Q2 sales of $13.65 billion, better than the consensus of $13.58 billion. 

EBay (EBAY) closed up more than +5% after GameStop proposed to buy the company for about $56 billion in cash and stock. 

GlobalFoundries (GFS) closed up more than +4% after Cantor Fitzgerald upgraded the stock to overweight from neutral with a price target of $80.

Amazon.com (AMZN) closed up more than +1% to lead gainers in the Dow Jones Industrials after Fubon Securities upgraded the stock to buy from neutral with a price target of $320. 

Earnings Reports(5/5/2026)

Advanced Micro Devices Inc (AMD), Ameren Corp (AEE), American Electric Power Co Inc (AEP), Aptiv PLC (APTV), Archer-Daniels-Midland Co (ADM), Arista Networks Inc (ANET), Assurant Inc (AIZ), Ball Corp (BALL), Corteva Inc (CTVA), Coterra Energy Inc (CTRA), Cummins Inc (CMI), DaVita Inc (DVA), Devon Energy Corp (DVN), Duke Energy Corp (DUK), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Electronic Arts Inc (EA), Emerson Electric Co (EMR), EOG Resources Inc (EOG), Expeditors International of Washington (EXPD), Fiserv Inc (FISV), Gartner Inc (IT), Healthpeak Properties Inc (DOC), Henry Schein Inc (HSIC), Huntington Ingalls Industries (HII), IDEXX Laboratories Inc (IDXX), International Flavors & Fragrances (IFF), IQVIA Holdings Inc (IQV), Jack Henry & Associates Inc (JKHY), Jacobs Solutions Inc (J), KKR & Co Inc (KKR), Leidos Holdings Inc (LDOS), Live Nation Entertainment Inc (LYV), Lumentum Holdings Inc (LITE), Marathon Petroleum Corp (MPC), Occidental Petroleum Corp (OXY), PayPal Holdings Inc (PYPL), Pfizer Inc (PFE), Prudential Financial Inc (PRU), Public Service Enterprise Group (PEG), Revvity Inc (RVTY), Rockwell Automation Inc (ROK), Skyworks Solutions Inc (SWKS), Solventum Corp (SOLV), Super Micro Computer Inc (SMCI), TransDigm Group Inc (TDG), Waters Corp (WAT), WEC Energy Group Inc (WEC).