Stocks Rally Before the Open on U.S.-Iran Peace Deal

June S&P 500 E-Mini futures (ESM26) are up +0.98%, and June Nasdaq 100 E-Mini futures (NQM26) are up +1.64% this morning, pointing to a sharply higher open on Wall Street as sentiment got a boost after U.S. President Donald Trump signed a preliminary agreement to end the Iran war.

The price of WTI crude fell over -2% on Thursday as investors wagered on a swift reopening of the Strait of Hormuz. President Trump told reporters that he signed the interim agreement with Iran at the Palace of Versailles near Paris, where he had dinner with French President Emmanuel Macron. Trump and his Iranian counterpart, Masoud Pezeshkian, signed the so-called memorandum of understanding on Wednesday, ahead of the previously scheduled Friday signing. The 14-point framework calls for Tehran to reopen the Strait of Hormuz after Washington lifts its blockade of Iranian ports and removes sanctions on Iranian oil sales. In an early indication that the shipping industry is responding to the deal, some oil and gas tankers began passing through the Strait of Hormuz, including vessels owned by Saudi Arabia’s state-run tanker company.

Investors are now awaiting a new round of U.S. economic data.

In yesterday’s trading session, Wall Street’s three main equity benchmarks closed lower. The Magnificent Seven stocks slid, with Meta Platforms (META) falling over -5% and Amazon.com (AMZN) dropping more than -3%. Also, telecommunication stocks declined, with Charter Communications (CHTR) slumping over -6% and AT&T (T) falling more than -3%. In addition, CarMax (KMX) sank about -9% as investors appeared unconvinced that the used-car retailer’s turnaround is gaining traction, even after it reported better-than-expected Q1 results. On the bullish side, chip stocks advanced, with Arm Holdings (ARM) climbing more than +5% to lead gainers in the Nasdaq 100 and Applied Materials (AMAT) rising over +4%.

Economic data released on Wednesday showed that U.S. retail sales jumped +0.9% m/m in May, stronger than expectations of +0.5% m/m, and core retail sales, which exclude motor vehicles and parts, grew +0.8% m/m, stronger than expectations of +0.6% m/m. Separately, U.S. pending home sales climbed +3.8% m/m in May, exceeding expectations of +0.8% m/m and marking the biggest increase in 20 months.

“Retail sales in May point to a resilient consumer despite accelerating inflation and higher borrowing costs. Looking ahead, the recent drop in oil prices should provide relief at the pump, while an improving labor market suggests a stable outlook for consumer spending,” said Angelo Kourkafas at Edward Jones.

As widely expected, the Federal Reserve left interest rates unchanged yesterday. The Federal Open Market Committee voted unanimously to keep the federal funds rate in a range of 3.50% to 3.75%. In their post-meeting statement, policymakers said inflation remained elevated, dropped language referring to potential additional adjustments to interest rates, and declared that “the committee will deliver price stability.” Policymakers’ updated projections showed that nine officials expect at least one quarter-point rate hike this year, with six forecasting at least two. Another nine anticipated either no move or a rate cut. Notably, one Fed official did not submit any interest-rate projections.

At a press conference, Fed Chairman Kevin Warsh confirmed that he was the official who did not submit a projection in the so-called dot plot. Also, Mr. Warsh pledged to restore price stability. “Persistently high prices are a burden for the American people, but the recent past need not be prologue,” he said. In addition, the new Fed chief announced the formation of multiple task forces to review five areas and propose changes to the way the Fed operates.

“[June’s FOMC] meeting confirms that the Fed’s recent hawkish shift was not just about higher energy prices. Despite the recent pullback in oil, half of the members of the FOMC expect rate hikes as soon as this year, reflecting strong labor market and inflation data,” said Kay Haigh at Goldman Sachs Asset Management.

Meanwhile, U.S. rate futures have priced in a 67.9% chance of no rate change and a 32.1% chance of a 25 basis point rate hike at the next FOMC meeting in July.

Today, investors will focus on U.S. Initial Jobless Claims data, set to be released in a couple of hours. Economists expect this figure to be 225K, compared to last week’s number of 229K.

The U.S. Philadelphia Fed Manufacturing Index will also be released today. Economists anticipate that the Philly Fed manufacturing index will stand at 9.8 in June, compared to last month’s value of -0.4.

The Conference Board’s Leading Economic Index for the U.S. will be released today as well. Economists project the May figure to rise +0.1% m/m, matching the previous month’s gain.

In addition, Wall Street is bracing for a quarterly event known as “triple-witching,” during which derivatives contracts linked to equities, index options, and futures expire, prompting traders collectively to either roll over their current positions or initiate new ones. 

On the earnings front, IT and consulting company Accenture (ACN) and grocery store operator Kroger (KR) are set to report their quarterly results today.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.46%, down -0.87%.

On Friday, U.S. stock and bond markets will be closed for Juneteenth.

The Euro Stoxx 50 Index is up +0.03% this morning as investors weigh the signing of a deal to end the war in the Middle East against the Fed’s hawkish hold. Chip and other AI-related stocks climbed on Thursday. At the same time, mining stocks underperformed. Data from the Office for National Statistics released on Thursday showed that the U.K.’s unemployment rate unexpectedly ticked down in the three months through April while wage growth remained flat. Separately, data showed that the Eurozone’s adjusted current account surplus widened slightly in April, supported by stronger exports and a larger trade surplus. Meanwhile, Switzerland’s central bank left its key rate unchanged at zero on Thursday and reiterated that it stood increasingly ready to intervene in the foreign-exchange market if needed amid still-high geopolitical uncertainty. Also, Norway’s central bank kept its key policy rate unchanged at 4.25%, as expected, but continued to signal a rate hike later this year as inflation remains elevated. Investor focus now turns to the interest rate decision from the Bank of England later in the day. The BoE is widely expected to leave rates unchanged at 3.75%. Investors will closely watch the vote split and the BoE’s communication for clues about the likely path of future rate decisions. In corporate news, Edenred (EDEN.FP) surged over +17% after a report said Britain’s BC Partners was considering a takeover of the company.

U.K. Average Earnings ex Bonus, U.K. Unemployment Rate, and Eurozone’s Current Account data were released today.

U.K. Average Earnings ex Bonus stood at 3.4% in the three months to April, stronger than expectations of 3.2%.

The U.K. Unemployment Rate was 4.9% in the three months to April, stronger than expectations of no change at 5.0%.

Eurozone’s April Current Account came in at 15.7 billion euros, weaker than expectations of 18.5 billion euros.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.43%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.65%.

China’s Shanghai Composite Index closed lower today as investors rotated out of traditional sectors and into technology stocks. Real estate stocks were among the biggest losers on Thursday. At the same time, AI-related stocks climbed after China’s top securities regulator said it would introduce reforms to support more listings by AI companies. Chairman of the China Securities Regulatory Commission Wu Qing said at Shanghai’s Lujiazui Forum on Wednesday that the reforms would focus on the tech-heavy Science and Technology Innovation Board in Shanghai and the ChiNext Board for high-growth startups in Shenzhen. The regulator plans to ease listing requirements for developers of large AI language models and support more “hard-tech” companies, including those in quantum technology, bio-manufacturing, and embodied intelligence, seeking to list on the STAR Board. Elsewhere, National Development and Reform Commission spokesperson Li Chao said on Thursday that China’s consumer-goods trade-in program boosted sales of related products by more than 820 billion yuan ($121.26 billion) during the January-May period. In corporate news, Lenovo Group fell over -4% in Hong Kong after the world’s largest personal-computer maker announced plans to raise $2 billion through a convertible-bond offering. Mainland China and Hong Kong stock markets will be closed on Friday for the Dragon Boat Festival holiday.

Japan’s Nikkei 225 Stock Index closed higher and hit a record high today as sentiment got a boost after U.S. President Donald Trump signed an interim agreement to end the war with Iran and reopen the Strait of Hormuz. The deal eased concerns about Japan’s economy, which relies heavily on energy imports from the Middle East. Technology and financial stocks led the gains on Thursday. The Nikkei closed above the 71,000 level for the first time. Meanwhile, the yen fell overnight to its weakest level against the U.S. dollar since July 2024, increasing the risk of official intervention. The move was driven largely by a rally in the U.S. dollar as traders increased bets that the Fed will raise interest rates this year. Japanese Chief Cabinet Secretary Minoru Kihara said on Thursday that the country stands ready to take appropriate action in response to exchange-rate movements. In other news, foreign investors sold a net 785.1 billion yen ($4.89 billion) worth of Japanese stocks in the week through June 13th, marking a third straight week of net selling, according to Ministry of Finance data. In corporate news, Obayashi Corp. rose over +2% after the company agreed to buy global construction firm Multiplex from Brookfield Asset Management for $650 million. Investor focus is now squarely on Japan’s National Core CPI for May, scheduled for release on Friday. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +4.88% to 30.53.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks staged a partial rebound in pre-market trading, with Nvidia (NVDA) and Meta Platforms (META) rising over +1%.

Chip and AI infrastructure stocks advanced in pre-market trading amid risk-on sentiment, with Marvell Technology (MRVL) and Western Digital (WDC) surging more than +5%.

Intel (INTC) climbed over +8% in pre-market trading after President Trump said that Apple had agreed to partner with the company to design and manufacture chips in the U.S.

Smith & Wesson (SWBI) jumped more than +14% in pre-market trading after the company posted better-than-expected FQ4 results.

Steel Dynamics (STLD) fell over -2% in pre-market trading after the company issued below-consensus Q2 EPS guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - June 18th

Accenture (ACN), The Kroger Co. (KR), ADS-TEC Energy (ADSE), Kazia Therapeutics (KZIA).