Stocks Settle Mixed on Conflicting US-Iran Signals

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.02%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.09%.  June E-mini S&P futures (ESM26) rose +0.04%, and June E-mini Nasdaq futures (NQM26) fell -0.10%.

Stock indexes settled mixed on Wednesday, with the Dow Jones Industrials posting a new record high and the Nasdaq 100 falling from a new all-time high.  Enthusiasm for artificial intelligence, lower oil prices, and easing bond yields were supportive for the broader equity market on Wednesday.  Crude oil prices fell by more than -5% amid optimism that oil flows from the Middle East will normalize soon, driven by a US-Iran peace deal.  The decline in crude prices has eased inflation expectations and lowered bond yields, with the 10-year T-note yield falling to a 1.5-week low of 4.45% on Wednesday. 

The weakness in energy producers and cybersecurity stocks on Wednesday weighed on the overall market.  Also, comments from President Trump weighed on stocks when he said he was “not satisfied” in negotiations with Iran, dampening expectations for an imminent end to the war and the reopening of the Strait of Hormuz.

US MBA mortgage applications fell -8.5% in the week ended May 22, with the purchase mortgage sub-index down -0.4% and the refinancing mortgage sub-index down -18.1%.  The average 30-year fixed rate mortgage rose +9 bp to a 9-month high of 6.65% from 6.56% in the prior week.

The US May Richmond Fed manufacturing survey of current conditions rose +10 to a 4.5-year high of 13.  stronger than expectations of 4.

Crude oil prices tumbled more than -5% on Wednesday to a 5-week low after Iranian state television said it obtained an unofficial draft of the US-Iran memorandum, which said US military forces would lift the naval blockade of Iran while Iran would allow restored commercial transit shipping through the Strait of Hormuz.  Also, Secretary of State Rubio said today that "an interim agreement is only a couple of days away." However, crude prices bounced from their lows when US officials said the unofficial draft obtained by Iranian state television is a "complete fabrication" and "not true."

The International Energy Agency (IEA) said in a recently released monthly report that global oil inventories declined at a rate of about 4 million bpd in March and April, and the market will remain “severely undersupplied” until October even if the conflict ends next month.  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 season is winding down, and earnings reports have been supportive of stocks.  As of Wednesday, 83% of the 475 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 mixed on Wednesday.  The Euro Stoxx 50 closed up by +0.11%.  China's Shanghai Composite closed down -1.25%. Japan's Nikkei Stock Average rallied to a new record high and closed up +0.01%.

Interest Rates

June 10-year T-notes (ZNM6) on Wednesday closed up by +2.5 ticks.  The 10-year T-note yield fell -0.8 bp to 4.477%.  June T-note prices climbed to a 1.5-week high on Wednesday, and the 10-year T-note yield fell to a 1.5-week low of 4.445%.  Wednesday’s -5% decline in WTI crude oil prices reduced inflation expectations and is bullish for T-note prices.  T-notes maintained modest gains amid decent demand for the Treasury’s $70 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.34, right on the 10-auction average.

European government bond yields finished mixed on Wednesday. The 10-year German Bund yield rose +0.9 bp to 2.987%.  The 10-year UK gilt yield fell to a 5-week low of 4.804% and finished down -1.7 bp to 4.858%.

Eurozone Apr new car registrations rose +5.1% y/y to 972,000 units.

ECB Governing Council member Yannis Stournaras said, "The likeliest outcome is an ECB interest rate hike in June" as the conflict in the Middle East and subsequent rise in energy prices are proving to be more prolonged.

German economic advisers to Chancellor Merz cut their 2026 German GDP forecast to 0.5% from a November estimate of 0.9%.

Swaps are discounting a 92% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

US Stock Movers

Airlines and cruise line operators rallied on Wednesday after WTI crude oil prices fell more than -5% to a 5-week low, reducing fuel costs and bolstering profitability prospects.  United Airlines Holdings (UAL) and Norwegian Cruise Line Holdings (NCLH) closed up more than +6%, and Alaska Air Group (ALK) closed up more than +5%.  Also, Carnival (CCL) closed up more than +4%, and Royal Caribbean Cruises Ltd (RCL) closed up more than +3%.  In addition,  Delta Air Lines (DAL) and Southwest Airlines (LUV) closed up more than +2%, and American Airlines Group (AAL) closed up +0.64. 

Energy producers and energy service providers moved lower on Wednesday after WTI crude oil prices fell more than -5% to a 5-week low.  Baker Hughes (BKR) closed down more than -5%, and Halliburton (HAL) closed down more than -3%.  Also, SLB Ltd (SLB) and APA Corp (APA) closed down more than -2%, and Devon Energy (DVN), Chevron (CVX), Diamondback Energy (FANG), Exxon Mobil (XOM), and ConocoPhillips (COP) closed down more than -1%. 

Zscaler (ZS) closed down more than -31% to lead cybersecurity stocks lower and losers in the Nasdaq 100 after forecasting Q4 revenue of $875 million to $878 million, below the consensus of $879.1 million.  Also, Fortinet (FTNT) and Okta (OKTA) closed down more than -4%, and CrowdStrike Holdings (CRWD), Palo Alto Networks (PANW), and Cloudflare (NET) closed down more than -3%. 

Dycom Industries (DY) is up more than +25% after reporting Q1 contract revenue of $1.96 billion, well above the consensus of $1.67 billion. 

AppLovin (APP) closed up more than +10% to lead gainers in the S&P 500 and Nasdaq 100 after Morgan Stanley laid out a bullish case for the stock based on rising conversion rates.

MGM Resorts International (MGM) closed up more than +9% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $46.

Bath & Body Works (BBWI) closed up more than +9% after reporting Q1 net sales of $1.38 billion, better than the consensus of $1.36 billion. 

GXO Logistics (GXO) closed up more than +4% after Barclays upgraded the stock to overweight from equal weight with a price target of $65.

FedEx (FDX) closed up more than +2% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $460.

Verra Mobility (VRRM) closed down more than -70% after cutting its full-year adjusted EPS estimate to $1.19-$1.25 from a prior estimate of $1.32-$1.38, weaker than the consensus of $1.36, and said Avis Budget had terminated its contract with the company.

Boston Scientific (BSX) closed down more than -12% to lead losers in the S&P 500 after CEO Mahoney mentioned potential near-term challenges in his presentation at an industry conference.

PDD Holdings (PDD) closed down more than -10% after reporting Q1 revenue of 106.23 billion yuan, well below the consensus of 108.6 billion yuan.

GlobalFoundries (GFS) closed down more than 9% after Mubadala Investment said it is selling a block of 22 million GFS shares at $ 85.80 to $ 86.30 each.

Dick’s Sporting Goods (DKS) closed down more than -5% after reporting a Q1 gross margin of 32.6%, below the consensus of 33.4%.

JPMorgan Chase (JPM) closed down more than -2% to lead losers in the Dow Jones Industrials after CEO Dimon said the company will spend about $1 billion more this year than executives expected last month. 

Earnings Reports(5/28/2026)

Autodesk Inc (ADSK), Best Buy Co Inc (BBY), Burlington Stores Inc (BURL), Costco Wholesale Corp (COST), Dell Technologies Inc (DELL), Dollar Tree Inc (DLTR), Elastic NV (ESTC), Gap Inc/The (GAP), Hormel Foods Corp (HRL), MongoDB Inc (MDB), NetApp Inc (NTAP), Okta Inc (OKTA), SentinelOne Inc (S), UiPath Inc (PATH).