S&P500
Snapshot of the benchmark US stock indices on Monday: Dow +0.9%, NASDAQ +0.9%, S&P 500 +1%, S&P 500 at 6,025, range 5,600–6,200
In the early hours of June 24, Donald Trump announced on his social media platform a ceasefire between Israel and Iran. According to Trump, both sides were to stop shelling within 6 hours, followed by a complete cessation of fire after 12 hours. If the ceasefire holds for more than 24 hours, the war between Israel and Iran should be considered over.
Israeli Prime Minister Netanyahu stated on the morning of June 24 that Israel is ready to abide by the ceasefire. However, at the time of writing this review, reports were emerging of new missile launches from Iran toward Israel. Overnight, a residential building in Be'er Sheva, Israel, was hit, with five fatalities reported.
Thus, at the time of this writing, it remains unclear whether the ceasefire will hold.
Yesterday, Iran launched several missile strikes on US bases in neighboring countries. According to Trump, there was no damage to US forces, and all missiles were intercepted. He also stated that Iran had warned the US in advance about the strikes, which helped prevent any damage. Oil traders, fearing that Iran might close the Strait of Hormuz in response to US strikes on Iranian facilities, reacted strongly — WTI oil dropped from $71 to $66 during the day.
Market overview for Monday, June 23
Yesterday's stock market saw sharp moves following developments in the Israel-Iran conflict, which escalated over the weekend after the US destroyed three nuclear facilities in Iran. The US-led strikes caused some unease in financial markets, but did not spark panic.
This was evident at the open, when stocks rose and oil prices fell, driven by the sentiment that the conflict would be contained and there would be no major disruptions in the Middle East oil supply. However, early gains faded when the S&P 500 faced resistance at the 6,000 level, and news broke that Iran was preparing a missile strike on a US base in Qatar.
The report turned out to be accurate, but follow-up reports indicated that Iran had warned officials in advance to minimize casualties, that the missiles were intercepted by Qatar's air defense system, and that there were no injuries or deaths. This triggered a relief rally that pushed the indices to new session highs, with the S&P 500 once again moving above 6,000.
Relief was also evident in the oil market. WTI crude futures sank by 7.0% to $68.63 per barrel. This drop dragged the energy sector down (-2.5%), making it the only sector in the S&P 500 to close in the red.
Gains in the other 10 sectors ranged from 0.1% (healthcare) to 1.8% (consumer discretionary), with eight sectors rising at least 1.0%.
The consumer discretionary sector was led by Tesla (TSLA $348.71, +$26.55, +8.24%), which surged after launching its robotaxi service in Austin, Texas.
Tesla also propelled a 1.3% increase in the Vanguard Mega Cap Growth Index Fund (MGK $352.79, +$4.62, +1.33%).
Rate-sensitive sectors such as real estate (+1.5%), utilities (+1.3%), and financials (+1.2%) showed relative strength, benefiting from falling Treasury yields. This decline was driven by flows into safe-haven assets and growing hopes that the Fed might cut rates at the July FOMC meeting.
Fed Governor Bowman (a voting member of the FOMC) said she could support a rate cut at the July meeting if inflationary pressures remain subdued. Her comments followed remarks by Fed Governor Waller (also a voter) on Friday, expressing that he believes the Federal Reserve could cut rates in July.
The yield on 2-year Treasuries dropped by 8 basis points to 3.83%, and the 10-year yield declined by 6 basis points to 4.32%. Meanwhile, the federal funds futures market increased the probability of a 25 basis point rate cut in July to 22.7%, up from 14.5% on Friday, according to the CME FedWatch Tool.
These views add intrigue to Fed Chair Jerome Powell's semiannual monetary policy report, which he will present Tuesday to the House Financial Services Committee. He will undoubtedly be expected to explain why the Fed, judging by his recent press conference, seems reluctant to cut rates in July.
Year-to-date performance:
- S&P 500: +2.4%
- Nasdaq: +1.7%
- DJIA: +0.1%
- S&P 400: –2.3%
- Russell 2000: –4.4%
Economic data highlights:
S&P Global US Manufacturing PMI (June): 52.0 (same as previous)
S&P Global US Services PMI (June): 53.1 (previous: 53.7)
Existing Home Sales rose 0.8% month-over-month in May to a seasonally adjusted annual rate of 4.03 million (consensus: 3.94 million), up from an unrevised 4.00 million in April. Sales were down 0.7% year-over-year.
Key takeaway: Inventory of existing homes for sale is rising, but overall demand remains muted due to affordability constraints driven by high prices and elevated mortgage rates.
Energy market
Brent oil is trading at $69.60, a drop of $11 since Monday's market open, as the feared closure of the Strait of Hormuz by Iran did not materialize.
Conclusion The US stock market has started a new wave of growth, so we maintain existing long positions. New long positions should only be considered after a significant pullback. Future developments depend heavily on whether the Israel-Iran ceasefire announced by Trump will actually come true.
