Stocks Pressured by Middle East Tensions and Weak US Economic News

The S&P 500 Index ($SPX) (SPY) today is down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.33%.  June E-mini S&P futures (ESM25) are down -0.30%, and June E-mini Nasdaq futures (NQM25) are down -0.33%. 

Stock indexes are sliding today, and crude oil is up by more than +2%, as market sentiment turned negative after President Trump played down the chance of an Israel-Iran ceasefire.  After leaving the G-7 meeting in Canada, President Trump said that he hasn’t reached out to Iran for peace talks “in any way, shape or form” and that a “permanent end and not a ceasefire” to the nuclear dispute with Iran would be the goal. 

Stock indexes remained lower due to concerns about stagflation after US May retail sales fell more than expected, and the May import price index excluding petroleum rose more than expected.  Also, homebuilder sentiment slumped after the June NAHB housing market index unexpectedly fell to a 2-1/2 year low.

US May retail sales fell -0.9% m/m, weaker than expectations of -0.6% m/m, and May retail sales ex-autos unexpectedly fell -0.3% m/m versus expectations of a +0.2% m/m increase.

The US May import price index ex-petroleum rose +0.2% m/m, stronger than expectations of +0.1% m/m.

US May manufacturing production rose +0.1% m/m, right on expectations.

The US June NAHB housing market index unexpectedly fell -2 to a 2-1/2 year low of 32, weaker than expectations of an increase to 36.

Hostilities between Israel and Iran entered a fifth day today with no signs of easing.  Israel said it saw a drop-off in Iranian attacks on Tuesday, saying only “a few dozen” missiles had been launched since midnight compared with the hundreds seen over the weekend.  Israel also said it is too early to assess the success of the current campaign in Iran, but strikes on the country’s nuclear facilities are “deepening” every day. 

So far, there’s also been no blockage of the vital Strait of Hormuz that handles about 20% of the world’s daily crude shipments, although navigational signals from over 900 vessels moving through the strait have been disrupted due to “extreme jamming” of signals from the Iranian port of Bandar Abbas, which has caused a collision of two tankers today near the Strait of Hormuz.   

Investors will be watching the G-7 meeting in a resort town near Banff, Canada, through today, although President Trump left the meeting early.  Investors are also bracing for negative tariff news over the next few weeks, following President Trump’s announcement last Wednesday that he intends to send letters to dozens of US trading partners within one to two weeks, setting unilateral tariffs ahead of the July 9 deadline that came with his 90-day pause. 

The markets will also be focused today on the FOMC’s 2-day meeting that began today, and expectations are for the fed funds target range to remain unchanged at 4.25%-4.50%.   The markets will look to the Fed’s dot-plot and post-meeting comments Wednesday from Fed Chair Powell as to when the Fed may again ease policy.  Also, on Wednesday, May housing starts are expected to fall -0.8% m/m to 1.350 million, and May building permits are expected to climb +0.2% m/m to 1.425 million.  In addition, weekly initial unemployment claims will be released on Wednesday due to the Juneteenth holiday on Thursday and are expected to fall by -3,000 to 245,000. 

The markets are discounting the chances at 0% for a -25 bp rate cut at the Tue-Wed FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell to a 3-week low and is down -0.88%.  China’s Shanghai Composite closed down -0.04%.  Japan’s Nikkei Stock 225 climbed to a 3-3/4 month high and closed up +0.59%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +3 ticks.  The 10-year T-note yield is down -1.8 bp to 4.421%.   T-notes are moving higher today on the increase in safe-haven demand as stocks fell after President Trump played down the chance of a ceasefire in the Israel-Iran war.  T-notes added to their gains after US May retail sales fell more than expected, and the June NAHB housing market index unexpectedly fell to a 2-1/2 year low. However, T-notes fell back from their best levels after a +2% jump in crude prices pushed inflation expectations higher, as the 10-year breakeven inflation rate rose to a one-week high today of 2.322%.

European government bond yields today are moving higher.  The 10-year German bund yield is up +0.8 bp to 2.535%.  The 10-year UK gilt yield is up +1.6 bp to 4.549%.

The German Jun ZEW survey expectations of economic growth rose +22.3 to 47.5, stronger than expectations of 35.0. 

ECB Governing Council member Stournaras said the ECB has found “equilibrium” on interest rates, inflation, and economic growth, but “if the Eurozone economy weakens further, if inflation decreases further below the target, then we may proceed to further rate cuts.”

Swaps are discounting the chances at 7% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Travel and hotel stocks are under pressure today after President Trump downplayed the chance for an early end to the Israel-Iran war.  United Airlines Holdings (UAL) is down more than -2%.  Also, Southwest Airlines (LUV), Delta Air Lines (DAL), and MGM Resorts International (MGM) are down more than -1%.  In addition, Las Vegas Sands (LVS) is down -0.75%, and Wynn Resorts Ltd (WYNN) is down -0.58%.

Redwire Corp (RDW) is down more than -15% after offering $200 million of shares of common stock in an underwritten registered public offering at $16.75 to $17.75 per share, an 18% discount to Monday’s closing prices of $20.57.

MakeMyTrip Ltd (MMYT) is down more than -8% after announcing an offering of 14 million shares of common stock and an offering of $1.25 billion in convertible senior notes due 2030.  

T-Mobile US (TMUS) is down more than -4% to lead losers in the Nasdaq 100 after holder Softbank Group said it sold 21.5 million shares of the stock to fund its AI plans. 

Navitas Semiconductor (NVTS) is down more than -4% after Deutsche Bank downgraded the stock to hold from buy. 

Energy stocks and energy service providers are moving higher, with the price of WTI crude oil up more than +1%.  APA Corp (APA), Baker Hughes (BKR), Diamondback Energy (FANG), and Valero Energy (VLO) are up more than +2%.  Also, Exxon Mobil (XOM), Devon Energy (DVN), Haliburton (HAL), Occidental Petroleum (OXY), ConocoPhillips (COP), Marathon Petroleum (MPC), Schlumberger (SLB), and Phillips 66 (PSX) are up more than -1%.  In addition, Chevron (CVX) is up more than +1% to lead gainers in the Dow Jones Industrials.

Verve Therapeutics (VERV) is up more than +76% after Eli Lilly & Co. agreed to buy the company for about $1.3 billion. 

Jabil (JBL) is up more than +11% to lead gainers in the S&P 500 after reporting Q3 net revenue of $7.83 billion, well above the consensus of $7.04 billion, and raising its full-year net revenue estimate to $29 billion from a previous estimate of $27.9 billion, stronger than the consensus of $27.93 billion.

Lennar (LEN) is up more than +2% after reporting Q2 revenue of $8.38 billion, better than the consensus of $8.26 billion.

Alkermes Plc (ALKS) is up more than +2% after UBS upgraded the stock to buy from neutral with a price target of $42.

Earnings Reports (6/17/2025)

Jabil Inc (JBL), John Wiley & Sons Inc (WLY), La-Z-Boy Inc (LZB).