Stocks Settle Sharply Lower on Escalating Middle East Tensions

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -1.62%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.87%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.98%.  June E-mini S&P futures (ESM26) fell -1.62%, and June E-mini Nasdaq futures (NQM26) fell -2.07%.

Stock indexes sold off sharply on Wednesday, with the Dow Jones Industrials falling to a 2.5-week low.  Rising geopolitical tensions in the Middle East lifted crude oil prices by more than +2% on Wednesday, sparking losses in stocks and bonds.  Chipmakers, AI-infrastructure stocks, and the Magnificent Seven technology stocks all retreated on Wednesday, pressuring the overall market.  Also, rising crude oil prices weighed on airline stocks, and trucking companies fell after Amazon expanded its LTL freight offering to all destinations in the US, including third-party warehouses, distribution centers, and retail partners.

Stocks extended losses and crude oil prices added to gains on Wednesday when President Trump pledged to strike Iran again after accusing the country of delaying talks on an interim peace deal.  Mr. Trump declined to say what targets US forces would hit but said: "We hit them hard yesterday, and we're going to hit them hard again today."

Stocks found some support on Wednesday after US May consumer prices came in as expected, easing inflation concerns.  Also, sharp gains in crude oil prices on Wednesday lifted energy producers.

US May CPI rose +4.2% y/y, right on expectations and the fastest pace of increase in 3 years.  May core CPI rose +2.9% y/y, right on expectations, and the fastest pace of increase in 7 months.

US MBA mortgage applications rose +10.8% in the week ended June 5, with the purchase mortgage sub-index up +7.3% and the refinancing mortgage sub-index up +15.3%.  The average 30-year fixed rate mortgage rose +3 bp to 6.60% from 6.57% in the prior week.

WTI crude oil prices (CLN26) soared more than +2% on Wednesday after the US and Iran exchanged strikes overnight. The US said it had completed an operation that saw fighter jets strike Iranian air defenses, ground control stations, and radar sites near the Strait of Hormuz in retaliation for Iran shooting down a US Apache helicopter.  In response, Iran launched missiles at four US military targets and fired drones at the main US naval base in the Middle East, located in Bahrain, and struck Ali Al Salem air base in Kuwait.  The increase in tensions risks derailing peace talks between Iran and the US, keeping the Strait of Hormuz closed, and further tightening global energy supplies.

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

Overseas stock markets settled lower on Wednesday.  The Euro Stoxx 50 fell to a 2.5-week low and closed down -0.66%.  China's Shanghai Composite closed down -0.42%.  Japan's Nikkei Stock Average closed down -1.89%.

Interest Rates

September 10-year T-notes (ZNU6) on Wednesday closed down -2.5 ticks, and the 10-year T-note yield rose +2.3 bp to 4.540%.  T-notes were under pressure on Wednesday after WTI crude oil prices surged more than +2%, which raised inflation expectations. Losses in T-notes were limited after the US May CPI report rose as expected, easing inflation concerns.  Also, strong demand for the Treasury’s $39 billion auction of 10-year T-notes was positive for T-notes, as the auction had a bid-to-cover ratio of 2.57, well above the 10-auction average of 2.47. 

European government bond yields moved higher on Wednesday.  The 10-year German Bund yield climbed to a 2.5-week high of 3.088% and finished up +3.4 bp to 3.076%.  The 10-year UK gilt yield rose +2.8 bp to 4.931%.

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

US Stock Movers

Chipmakers and AI-infrastructure stocks moved lower on Wednesday and led the broader market lower.  ON Semiconductor (ON) and Qualcomm (QCOM) closed down more than -6%, and Marvell Technology (MRVL), ARM Holdings Plc (ARM), and Western Digital (WDC) closed down more than -5%.  Also, Broadcom (AVGO), Advanced Micro Devices (AMD), and Micron Technology (MU) closed down more than -4%, and NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), and Seagate Technology Holdings Plc (STX) closed down more than -3%.

Most of the Magnificent Seven technology stocks settled lower on Wednesday, weighing on the overall market. Nvidia (NVDA) and Tesla (TSLA) closed down more than -3%, and Alphabet (GOOGL), Amazon.com (AMZN), and Meta Platforms (META) closed down more than -2%.  Also, Microsoft (MSFT) closed down more than -1%.  However, Apple (AAPL) bucked the trend, closing up 0.35%.

Airline stocks and cruise line operators sold off on Wednesday as WTI crude oil rose more than 2%, boosting fuel costs and dampening the companies’ profitability prospects.  Alaska Air Group (ALK) closed down more than -7%, and United Airlines Holdings (UAL), Carnival (CCL), and Norwegian Cruise Line Holdings (NCLH) closed down more than -6%.  Also, Delta Air Lines (DAL) and Royal Caribbean Cruises (RCL) closed down more than -5%, and American Airlines Group (AAL) and Southwest Airlines (LUV) closed down more than -4%. 

Trucking companies were under pressure on Wednesday after Amazon expanded its LTL freight offering to all destinations in the US, including third-party warehouses, distribution centers, and retail partners.  FedEx Freight Holding Co (FDXF) closed down more than -6%, and Old Dominion Freight Line (ODFL) and XPO Inc (XPO) closed down more than -5%.  Also, ArcBest (ARCB) closed down more than -4%, and Saia Inc (SAIA) and CH Robinson Worldwide (CHRW) closed down more than -3%.  In addition, JB Hunt Transport Services (JBHT) closed down more than -2%. 

Energy producers and service providers moved higher on Wednesday as WTI crude oil rose more than +2%.  Devon Energy (DVN) closed up more than +5%, and APA Corp (APA) closed up more than +3%.  Also, ConocoPhillips (COP) closed up more than +2%, and Marathon Petroleum (MPC), Phillips 66 (PSX), Chevron (CVX), Diamondback Energy (FANG), Exxon Mobil (XOM), and Valero Energy (VLO) closed up more than +1%.

Super Micro Computer (SMCI) closed down more than -27% to lead losers in the S&P 500 after saying it plans $7 billion in equity and equity-linked financing transactions to fund component purchases. 

Dianthus Therapeutics (DNTH) closed down more than -9% after peer developer Sanofi halted a late-stage trial of an experimental therapy for a rare autoimmune disorder, citing efficacy concerns. 

Summit Therapeutics (SMMT) closed down more than -8% after announcing it had commenced an underwritten public offering of $500 million of shares of its common stock. 

Cracker Barrel Old Country Store (CBRL) closed up more than +22% after raising its full-year revenue forecast to $3.27 billion to $3.30 billion from a previous estimate of $3.24 billion to $3.27 billion, stronger than the consensus of $3.25 billion. 

Casey’s General Stores (CASY) closed up more than +20% to lead gainers in the S&P 500 after reporting Q4 revenue of $4.57 billion, above the consensus of $4.32 billion.

Live Nation Entertainment (LYV) rose more than +2% after Morgan Stanley raised its price target on the stock to $200 from $185, saying concerns around the impact of regulation on resale ticket pricing are overstated.

Illumina (ILMN) closed up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $185. 

Earnings Reports(6/11/2026)

Adobe Inc (ADBE), Lennar Corp (LEN), RH (RH).