Stocks Fall on Escalation of US-Iran Hostilities

The S&P 500 Index ($SPX) (SPY) today is down -0.40%, the Dow Jones Industrial Average ($DOWI) (DIA) is down -0.74%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.08%.  June E-mini S&P futures (ESM26) are down -0.48%, and June E-mini Nasdaq futures (NQM26) are down -0.08%.

Stock indexes are sliding today, with the Nasdaq 100 falling from a new record high.  The broader market is under pressure today as the US and Iran clashed overnight, sending WTI crude oil prices up more than +1% to a 1.5-week high.  Shortly after disabling an empty oil tanker heading back to Iran, the US military said it came under missile and drone attacks as Iran targeted the US’s Bahrain naval base and the Ali Al-Salem airbase in Kuwait. US forces struck a communications tower on the Iranian island of Qeshm near the Strait of Hormuz as part of the skirmishes.  In addition, weakness in software companies, cybersecurity, and private credit stocks today is weighing on the overall market.

On the positive side, AI-infrastructure spending continues to support technology stocks.  Marvell Technology is up more than +7% today, adding to Tuesday’s 32% surge, to lead chipmakers higher after Nvidia CEO Huang predicted the company would be the next to hit a $1 trillion valuation, more than five times its current market capitalization. 

Signs of strength in the US economy are also supportive of stocks after today’s reports showed the May ADP employment change, the May ISM services index, and Apr factory orders rose more than expected.

The US May ADP employment change rose 122,000, slightly stronger than expectations of 120,000 and the biggest increase in 16 months.

The US May ISM services index rose +0.9 to 54.5, stronger than expectations of 53.8.  The May ISM services prices paid sub-index rose +0.6 to a 3.75-year high of 71.3, although below expectations of 72.3.

US Apr factory orders rose +4.8% m/m, stronger than expectations of +4.6% m/m and the largest increase in 11 months.

US MBA mortgage applications fell -2.5% in the week ended May 29, with the purchase mortgage sub-index down -2.9% and the refinancing mortgage sub-index down -2.3%.  The average 30-year fixed rate mortgage fell -8 bp to 6.57% from 6.65% in the prior week.

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

The generally favorable Q1 earnings season is winding down.  As of today, 84% of the 485 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 are mixed today.  The Euro Stoxx 50 is down -0.66%.  China's Shanghai Composite closed up +0.22%.  Japan's Nikkei Stock Average rallied to a new record high and closed up +2.50%.

Interest Rates

September 10-year T-notes (ZNU6) today are down -6 ticks, and the 10-year T-note yield is up +3.7 bp to 4.481%.  T-note prices are under pressure today as an escalation of US-Iran tensions lifted WTI crude oil by more than +1% to a 1.5-week high, boosting inflation expectations.  T-notes added to their losses today after US economic reports showed the May ADP employment change, the May ISM services index, and Apr factory orders rose more than expected, hawkish factors for Fed policy.

European government bond yields are moving higher today.  The 10-year German Bund yield is up +4.5 bp to 3.019%.  The 10-year UK gilt yield is up +5.2 bp to 4.911%.

The Eurozone May S&P composite PMI was revised upward by +1.0 to 48.5 from the previously reported 47.5.

Eurozone Apr PPI rose +4.9% y/y, right on expectations and the fastest pace of increase in more than 3 years.

The UK May S&P services PMI was revised upward by +1.4 to 49.3 from the previously reported 47.9.

Swaps are discounting a 97% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

US Stock Movers

Software stocks are sliding today, pressuring the broader market.  Datadog (DDOG) is down more than -8% to lead losers in the Nasdaq 100, and International Business Machines (IBM) is down more than -6% to lead losers in the Dow Jones Industrials.  Also, Atlassian Corp (TEAM) is down more than -6%, and Oracle (ORCL) is down more than -5%. In addition, ServiceNow (NOW), Salesforce (CRM), and Palantir Technologies (PLTR) are down more than -4%, and Microsoft (MSFT) and Intuit (INTU) are down more than -3%.  Finally, Workday (WDAY), Autodesk (ADSK), and Adobe Systems (ADBE) are down more than -2%.

Cybersecurity stocks are retreating today, led by a -6% decline in Palo Alto Networks (PANW) despite reporting better-than-expected Q3 earnings, as it failed to meet elevated buy-side expectations.  Also, Okta (OKTA) is down more than -6%, and Zscaler (ZS) is down more than -5%.  In addition, Cloudflare (NET) is down more than -3%, CrowdStrike Holdings (CRWD) is down more than -1%, and Fortinet (FTNT) is down -0.45%.

Private credit stocks are faltering today as the 17% redemption requests for Cliffwater’s private credit fund weighed on alternative asset stocks.  Ares Management (ARES) and KKR & Co (KKR) are down more than -5%, and Carlyle Group (CG) and Blackstone (BX) are down more than -4%.  Also, Apollo Global Management (APO) is down more than -3%, and Blue Owl Capital (OWL) and BlackRock (BLK) are down more than -2%. 

Chipmakers and AI-infrastructure stocks are climbing today, providing support to the overall market. Western Digital (WDC) is up more than +6% to lead gainers in the S&P 500 and Nasdaq 100, and Sandisk (SNDK), Intel (INTC), and Qualcomm (QCOM) are up more than +4%.  Also, Applied Materials (AMAT), ON Semiconductor (ON), and Seagate Technology Holdings Plc are up more than +3%, and Advanced Micro Devices (AMD), Lam Research (LRCX), Analog Devices (ADI), and KLA Corp (KLAC) are up more than +2%. 

Ulta Beauty (ULTA) is down more than -4% after analysts noted the company’s annual guidance implies the outlook for the second half of the year is weaker than expected.

Gitlab (GTLB) is down more than -3% after announcing that it will cut about 14% of its workforce and exit 22 countries as part of a restructuring.

GameStop (GME) is up more than +7% after reporting Q1 net sales rose +14% y/y to $835.3 million and said its board of directors approves a $2 billion share repurchase authorization. 

Marvel Technology (MRVL) is up more than +6% today, adding to Tuesday’s +32% surge, after Nvidia CEO Huang predicted that the company will be the next to hit a $1 trillion valuation, more than five times its current market capitalization. 

Medtronic Plc (MDT) is up more than +4% after reporting Q4 revenue of $9.81 billion, above the consensus of $9.64 billion.

Sherwin-Williams (SHW) is up more than +2% after the company and Nippon Paint abandoned efforts to jointly acquire Akzo Nobel. 

IREN Ltd (IREN) is up more than +1% after signing a transmission connection agreement to support a planned 800-megawatt data center campus in Bundey, South Australia. 

Earnings Reports(6/3/2026)

Broadcom Inc (AVGO), CrowdStrike Holdings Inc (CRWD), Five Below Inc (FIVE), Macy's Inc (M), Medtronic PLC (MDT), Ollie's Bargain Outlet Holding (OLLI), PVH Corp (PVH), Thor Industries Inc (THO), Veeva Systems Inc (VEEV).