June S&P 500 E-Mini futures (ESM26) are up +0.67%, and June Nasdaq 100 E-Mini futures (NQM26) are up +1.03% this morning as investors remained hopeful that the latest U.S. strikes on Iran would not derail talks to end the Middle East conflict.
The price of Brent crude advanced about +3% on Tuesday after the U.S. struck targets in southern Iran on Monday in what American military officials described as defensive actions. The U.S. sank two boats belonging to Iran’s Islamic Revolutionary Guard Corps that were laying mines in the Strait of Hormuz. Then, Iran began firing surface-to-air missiles at U.S. warplanes, prompting the U.S. to strike a missile launch site near Bandar Abbas. The strike came amid ongoing talks between the two countries to end the war.
Investors appear to largely brush aside a rebound in crude prices and remain optimistic that peace talks can move forward. U.S. Secretary of State Marco Rubio said on Tuesday that negotiating a deal with Iran could “take a few days.” U.S. President Donald Trump said in a Truth Social post on Monday that negotiations with Iran over an interim agreement to extend the ceasefire and reopen the Strait of Hormuz were “proceeding nicely.” Meanwhile, Pakistan’s military chief, Asim Munir, the main intermediary between the warring sides, told China that an agreement is “close to being reached.”
Treasuries climbed across the curve in a catch-up move as cash trading resumed after the Memorial Day holiday, with the 10-year yield falling seven basis points to 4.50%.
This week, market participants look ahead to a fresh batch of U.S. economic data, with particular attention on the PCE inflation reading, remarks from Federal Reserve officials, and earnings reports from several high-profile companies.
In Friday’s trading session, Wall Street’s major equity averages ended in the green. Dell Technologies (DELL) jumped over +16% and was the top percentage gainer on the S&P 500 after Wells Fargo raised its price target on the stock to $270 from $180. Also, chip stocks rallied, with Qualcomm (QCOM) surging more than +11% to lead gainers in the Nasdaq 100 and NXP Semiconductors N.V. (NXPI) rising over +5%. In addition, Workday (WDAY) climbed more than +5% after the software company posted stronger-than-expected Q1 results. On the bearish side, Take-Two Interactive Software (TTWO) slid over -4% and was the top percentage loser on the Nasdaq 100 after the videogame maker issued below-consensus FY27 net bookings guidance.
Economic data released on Friday showed that the University of Michigan’s U.S. May consumer sentiment index was revised lower to a record low of 44.8, weaker than expectations of no change at 48.2. Also, the University of Michigan’s U.S. May year-ahead inflation expectations were revised upward to 4.8%, stronger than expectations of 4.5%, and 5-year implied inflation expectations were revised upward to 3.9%, stronger than expectations of 3.4%. At the same time, the Conference Board’s leading economic index for the U.S. unexpectedly rose +0.1% m/m in April, stronger than expectations of -0.1% m/m.
Fed Governor Christopher Waller said on Friday he supports making it clear that the central bank’s next interest rate move is just as likely to be a hike as a cut, as the energy shock from the Iran war drives prices higher. “Inflation is not headed in the right direction. I would support removing the ‘easing bias’ language in our policy statement to make it clear that a rate cut is no more likely in the future than a rate increase,” Waller said.
“Waller’s latest remarks confirm the hawkish shift at the Fed,” said Krishna Guha at Evercore.
Meanwhile, U.S. rate futures have priced in a 98.1% chance of no rate change and a 1.9% chance of a 25 basis point rate hike at the conclusion of the Fed’s June meeting.
In this holiday-shortened week, the April reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight, offering clues on price pressures and the trajectory of interest rates. Economists project the core PCE price index to climb +3.3% in April from a year ago, marking the fastest pace since late 2023. Any upside surprise would add to speculation that rates will remain on hold for the rest of the year and that the next move could even be a hike. The second estimate of first-quarter U.S. gross domestic product will also attract attention. Other noteworthy data releases include Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Personal Spending, Personal Income, New Home Sales, the Richmond Fed Manufacturing Index, and the Chicago PMI.
Alongside a raft of economic data, several Fed officials are scheduled to speak this week, including Fed Vice Chair Philip Jefferson, Fed Governor Lisa Cook, New York Fed President John Williams, and St. Louis Fed President Alberto Musalem. Investors will scrutinize their remarks for any signs of concern about the longer-term inflation outlook amid persistent supply constraints tied to the Middle East conflict.
In addition, high-profile companies such as Dell Technologies (DELL), Marvell Technology (MRVL), Salesforce (CRM), Synopsys (SNPS), HP Inc. (HPQ), and Costco Wholesale (COST) are slated to release their quarterly results this week.
Today, investors will focus on the U.S. Conference Board’s Consumer Confidence Index, which is set to be released in a couple of hours. Economists, on average, forecast that the May CB Consumer Confidence index will stand at 91.9, compared to last month’s figure of 92.8.
The U.S. S&P/CS HPI Composite - 20 n.s.a. will also be released today. Economists expect the March figure to rise +0.9% y/y, unchanged from February.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.50%, down -1.42%.
The Euro Stoxx 50 Index is down -0.78% this morning as investors grappled with uncertainty surrounding hopes for a U.S.-Iran peace deal. Sentiment weakened as Brent crude advanced on Tuesday after the U.S. struck targets in southern Iran on Monday in what American military officials described as defensive actions. Automobile stocks led the declines on Tuesday, with Ferrari N.V. (RACE.M.DX) slumping over -6% after the luxury sports-car maker presented its first-ever electric vehicle. Technology stocks also sank. At the same time, mining stocks outperformed. Meanwhile, Eurozone government bond yields rose on Tuesday as a rebound in Brent crude prices fueled inflation concerns. European Central Bank Executive Board member Isabel Schnabel told Reuters that the central bank should raise interest rates in June, even if ongoing peace talks with Iran result in a deal. “Given the size and the persistence of the current shock, looking through is no longer an option in my view,” Schnabel said. Investor focus this week is on preliminary May inflation data from France, Spain, Germany, and Italy, along with the Eurozone’s consumer and business surveys for May. The accounts of the ECB’s April policy meeting will also draw attention. In addition, ECB chief economist Philip Lane and Governing Council member Fabio Panetta are set to speak this week. In corporate news, Kingfisher Plc (KGF.LN) rose over +3% after the home improvement retailer maintained its full-year profit guidance.
The European economic data slate is mainly empty on Tuesday.
Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.17%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.25%.
China’s Shanghai Composite Index closed slightly lower today, taking a breather after surging +1% in the previous session amid expectations that Beijing’s crackdown on illegal cross-border trading would redirect flows into domestic equities. Investors also assessed developments in the Middle East, with optimism over an imminent U.S.-Iran peace deal tempered by fresh U.S. strikes on sites in Iran. China on Friday launched an unprecedented campaign against illegal cross-border trading to curb capital outflows and penalized online brokers Tiger, Futu, and Longbridge. The campaign, which mandates the wind-down of illegitimate trading accounts within two years, could affect as much as HK$294 billion ($37.53 billion) in Hong Kong, according to Kaiyuan Securities. Technology stocks retreated on Tuesday after a rally in the previous session driven by optimism over Huawei’s near breakthrough in advanced production. Limiting losses, shares of major investment banks rose on bets they will benefit from regulators’ crackdown on brokers moving Chinese money offshore without a license. In corporate news, WuXi Biologics (Cayman) climbed over +5% in Hong Kong after the company proposed to buy back up to $400 million of its shares on the open market. Investor attention is now squarely on China’s April industrial profit data, scheduled for release on Wednesday, which will provide insight into how companies are coping with a spike in energy prices following the start of the Middle East conflict.
Japan’s Nikkei 225 Stock Index closed slightly lower today, retreating from a record high as investors took profits after a recent rally. The Nikkei climbed 8.95% over the past three sessions in its sharpest three-day advance in more than six years. Oil prices rose in Tokyo trading on Tuesday after U.S. strikes on sites in Iran dampened optimism over a potential deal to end the war, prompting investors to sell stocks to lock in profits from the sharp rally. “Optimism over a U.S.-Iran peace deal has already been priced in, and gains in oil prices weighed on sentiment,” said Daisuke Hashizume at Daiwa Securities. Healthcare and electronics stocks led the declines on Tuesday. At the same time, SoftBank Group surged over +10% on hopes of substantial returns from the tech investor’s stakes in OpenAI and SB Energy, should the two go public, providing the biggest support for the Nikkei. Meanwhile, Japanese government bond yields edged higher on Tuesday as a rebound in oil prices stoked inflation concerns, while worries over the expansion of government spending persisted. Bank of Japan Deputy Governor Ryozo Himino said on Tuesday that the central bank remains committed to pursuing further rate hikes, but the timing and pace will hinge on the economic impact of the Middle East conflict. On the economic front, data showed on Tuesday that Japan’s March leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, was revised lower. Investor focus this week is on a raft of Japan’s economic data, which will provide clues on the impact of the Middle East conflict. The government is set to release Tokyo Core CPI for May, along with April figures for industrial production, retail sales, and employment. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.14% to 29.36.
The Japanese March Leading Index came in at 114.0, weaker than expectations of 114.5.
Pre-Market U.S. Stock Movers
The Magnificent Seven stocks edged higher in pre-market trading, with Nvidia (NVDA) rising over +1% and Tesla (TSLA) gaining +1%.
Chip stocks climbed in pre-market trading, with Micron Technology (MU) and Marvell Technology (MRVL) surging more than +5%.
Shares of rocket and satellite companies jumped in pre-market trading, extending a recent rally in the sector after SpaceX publicly filed for what could become the largest-ever initial public offering. Redwire Corp. (RDW) was up over +15%, MDA Space (MDA) was up more than +14%, and Firefly Aerospace (FLY) was up over +10%.
Okta (OKTA) rose more than +2% in pre-market trading after Arete double-upgraded the stock to Buy from Sell with a $127 price target.
Vodafone (VOD) fell over -1% in pre-market trading after BofA downgraded the stock to Underperform from Neutral with a price target of $13.13.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - May 26th
AutoZone (AZO), Elbit Systems (ESLT), Zscaler (ZS), Semtech (SMTC), Modine Manufacturing Company (MOD), CSW Industrials (CSW), Champion Homes (SKY), Box, Inc. (BOX), Silvercorp Metals (SVM), Transcat (TRNS), Digital Turbine (APPS), Ooma, Inc. (OOMA).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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