Stocks Set for Muted Open as Investors Brace for Iran’s Response to U.S. Attack, PCE Inflation Data and Powell’s Testimony Awaited

September S&P 500 E-Mini futures (ESU25) are down -0.10%, and September Nasdaq 100 E-Mini futures (NQU25) are down -0.11% this morning, pointing to a muted open on Wall Street as investors await Tehran’s response after the U.S. struck Iran’s nuclear facilities.

The U.S. struck three Iranian sites over the weekend that form the backbone of the country’s nuclear infrastructure. U.S. President Donald Trump hailed the strikes as a “spectacular military success” in a Saturday night address, while cautioning that more could follow if “peace does not come quickly.” Investors are watching for Iran’s response to the airstrike, as it could drive sentiment. Tehran has stated that all options are on the table, including trade disruptions through the Strait of Hormuz, a key route for 20% of global oil and gas shipments. Still, crude prices gave up earlier gains amid speculation that the threat of oil trade disruption may not materialize. Analysts noted that Iran will likely avoid a full-scale retaliation.

“Markets are still waiting to see what Iran will do next. Hormuz is still open, trade is flowing, Iran’s crude production facilities were untouched,” said analysts at Peak Trading Research. 

Investor focus this week is also on Federal Reserve Chair Jerome Powell’s congressional testimony, earnings reports from several high-profile companies, and the release of the Fed’s preferred inflation gauge and other key economic data.

In Friday’s trading session, Wall Street’s major equity averages closed mixed. Chip stocks retreated after The Wall Street Journal reported that the U.S. might revoke waivers for allies with semiconductor plants in China, with KLA Corp. (KLAC) sliding over -2% and Lam Research (LRCX) falling more than -1%. Also, Accenture (ACN) slumped over -6% and was the top percentage loser on the S&P 500 after the IT services company reported weaker-than-expected FQ3 new bookings. In addition, Smith & Wesson Brands (SWBI) tumbled more than -19% after the gunmaker posted downbeat FQ4 results. On the bullish side, Kroger (KR) surged over +9% and was the top percentage gainer on the S&P 500 after the retailer reported better-than-expected Q1 adjusted EPS and raised its full-year same-store sales guidance.

Economic data released on Friday showed that the U.S. Philly Fed manufacturing index came in at -4.0 in June, weaker than expectations of -1.7. Also, the Conference Board’s leading economic index for the U.S. fell -0.1% m/m in May, in line with expectations.

Fed Governor Christopher Waller said on Friday that the central bank could cut interest rates as early as next month, reaffirming his view that the inflationary impact of tariffs is likely to be short-lived. At the same time, San Francisco Fed President Mary Daly said that lowering interest rates this fall looks more appropriate than making a move when policymakers meet in July. “For me, I look more to the fall. By then, we’ll have quite a bit more information, and businesses are telling me that’s what they’re going to look to for some resolution,” Daly said.

Meanwhile, U.S. rate futures have priced in an 85.5% probability of no rate change and a 14.5% chance of a 25 basis point rate cut at the conclusion of the Fed’s July meeting.

This week, the May reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight, as it may provide clues on the path for interest rates. The Conference Board’s consumer confidence survey for June will also be closely monitored amid recent weak sentiment indicators that have been moving markets due to tariff concerns. Other noteworthy data releases include U.S. GDP (third estimate), the S&P/CS HPI Composite - 20 n.s.a., Current Account, the Richmond Fed Manufacturing Index, Building Permits, New Home Sales, Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Wholesale Inventories (preliminary), Pending Home Sales, Personal Income, Personal Spending, and the University of Michigan’s Consumer Sentiment Index.

Fed Chair Jerome Powell’s semi-annual monetary policy testimony on Capitol Hill will also be in focus this week. Powell will testify before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday. The Fed chief will likely stress that although rate cuts are possible this year, policymakers seek greater clarity on the economic effects of U.S. trade policy. President Trump has relentlessly attacked Powell for the central bank’s reluctance to cut interest rates, a criticism that may be echoed by some lawmakers. In addition to Mr. Powell delivering the Fed’s policy report, a host of other Fed officials, including Goolsbee, Bowman, Kugler, Williams, Hammack, Barr, Barkin, and Cook, are scheduled to speak this week.

Market participants will be watching earnings reports from several high-profile companies as well, with shoemaker Nike (NKE), package delivery service FedEx (FDX), and chipmaker Micron Technology (MU) scheduled to report their quarterly results this week.

Today, all eyes are focused on S&P Global’s flash U.S. purchasing managers’ surveys, as they serve as an important gauge of economic growth. The data come amid concerns over President Trump’s tariff policy and the ongoing conflict between Israel and Iran. Economists, on average, forecast that the June Manufacturing PMI will come in at 51.1, compared to last month’s value of 52.0. Also, economists expect the June Services PMI to be 52.9, compared to 53.7 in May.

U.S. Existing Home Sales data will be released today as well. Economists foresee the May figure standing at 3.96M, compared to 4.00M in April.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.387%, up +0.27%.

The Euro Stoxx 50 Index is up +0.05% this morning as investors remained surprisingly calm following U.S. strikes on Iranian nuclear sites over the weekend, with many speculating that Iran will steer clear of a major retaliation. Technology and energy stocks advanced on Monday, while defense stocks retreated. A survey released on Monday showed that the Eurozone economy barely grew for a second straight month in June as the bloc’s dominant services sector showed only slight improvement and manufacturing showed none at all. Meanwhile, European Central Bank Governing Council member Mario Centeno said in an interview with La Stampa published on Sunday that the central bank must provide the euro-area economy with “further stimulus.” In corporate news, Spectris Plc (SXS.LN) surged over +15% after private equity firm Advent agreed to acquire the company in a deal valued at 4.4 billion pounds ($5.91 billion).

Eurozone’s Composite PMI (preliminary), Eurozone’s Manufacturing PMI (preliminary), and Eurozone’s Services PMI (preliminary) data were released today.

Eurozone June Composite PMI has been reported at 50.2, weaker than expectations of 50.5.

Eurozone June Manufacturing PMI stood at 49.4, weaker than expectations of 49.6.

Eurozone June Services PMI arrived at 50.0, in line with expectations.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.65%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.13%.

China’s Shanghai Composite Index reversed earlier losses and closed higher today as investors looked ahead to the upcoming meeting of the National People’s Congress Standing Committee, where fresh stimulus measures might be introduced. Investors also monitored the latest geopolitical developments in the Middle East. The U.S. carried out strikes on Iranian nuclear facilities over the weekend, with investors watching for Tehran’s response and its potential consequences. Shipping stocks jumped on Monday amid speculation that tanker freight rates could climb following the U.S. airstrikes. Defense stocks also gained ground. Meanwhile, investors are now awaiting the National People’s Congress Standing Committee meeting, scheduled to run from Tuesday to Thursday. Chinese lawmakers are reportedly set to examine draft legislation aimed at revising laws on unfair competition and potential countermeasures to U.S. tariffs. Beijing is also expected to review administrative penalties, along with maritime, fisheries, and civil aviation regulations, according to Xinhua News Agency. In other news, the Wall Street Journal reported on Friday that the U.S. may revoke waivers that permit major semiconductor manufacturers to send American chip-making equipment to their factories in China without applying for a separate license each time. However, analysts noted that the move could be a negotiation tactic to pressure China to reach a trade deal.

Japan’s Nikkei 225 Stock Index closed slightly lower today as uncertainty over the Middle East deepened following U.S. strikes on Iran’s nuclear facilities. Chip stocks underperformed on Monday. Still, the benchmark index’s losses were limited as the yen’s slide to a nearly six-week low against a broadly stronger U.S. dollar provided some support to export-oriented stocks. The safe-haven yen weakened because “investors seem more focused this time on the impact of higher oil prices on Japan’s trade balance,” according to Yunosuke Ikeda, chief macro strategist at Nomura Securities. Meanwhile, investors digested positive economic data from the country. A private-sector survey released on Monday showed that Japan’s manufacturing activity expanded in June for the first time in nearly a year, though demand conditions remain uncertain amid concerns over U.S. tariffs and the global economic outlook. Also, growth in the service sector picked up pace, lifting overall business activity to a four-month high. In other news, the Financial Times reported on Friday that Japan scrapped a high-level meeting with the U.S. after the Trump administration unexpectedly demanded increased defense spending from Tokyo. Investor focus this week is on Japan’s retail sales data, which, along with Tokyo CPI, a leading indicator for Japan’s nationwide gauge of prices, will help guide the Bank of Japan’s next policy decisions. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +3.91% to 26.60.

The Japanese June au Jibun Bank Manufacturing PMI (preliminary) came in at 50.4, stronger than expectations of 49.5.

Pre-Market U.S. Stock Movers

Tesla (TSLA) rose over +1% in pre-market trading after the electric vehicle maker rolled out its robotaxi service in Austin, Texas.

Defense stocks are moving higher in pre-market trading after the weekend U.S. attack on Iranian nuclear sites, with Northrop Grumman (NOC) and RTX Corp. (RTX) rising about +1%.

Advanced Micro Devices (AMD) gained more than +1% in pre-market trading after Melius Research upgraded the stock to Buy from Hold with a $175 price target.

Northern Trust (NTRS) climbed over +4% in pre-market trading after the Wall Street Journal reported that Bank of New York Mellon had approached the company last week to express interest in a merger.

Dow (DOW) fell more than -1% in pre-market trading after BMO Capital downgraded the stock to Underperform from Market Perform with a price target of $22.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - June 23rd

FactSet Research (FDS), Commercial Metals (CMC), KB Home (KBH), Jerash (JRSH).