Key facts
- Wall Street indexes opened higher on Monday following a pause in U.S.-Iran hostilities.
- The de-escalation in the Middle East led to a sharp drop in oil prices, with Brent Crude falling 7.8% to $89.23 a barrel.
- Energy-sensitive stocks like airlines and cruise operators gained, while energy companies such as Occidental Petroleum and Exxon Mobil declined.
- Investors are anticipating a week of major corporate earnings, economic data, and a Federal Reserve interest rate decision.
- Traders are pricing in at least 25 basis points of rate hikes this year, with a 31% chance of a hike this week.
Wall Street's main indexes opened higher on Monday, driven by a pause in hostilities between the United States and Iran, which boosted investor risk appetite. The Dow Jones Industrial Average rose 0.44%, the S&P 500 gained 0.70%, and the Nasdaq Composite climbed 1.04% at the opening bell.
The de-escalation in the Middle East led to a sharp drop in oil prices, with Brent Crude falling 7.8% to $89.23 a barrel. This decline weighed on energy company shares like Occidental Petroleum and Exxon Mobil, which were down 4% and 3.1% respectively. Conversely, stocks sensitive to energy prices, including airlines like United Airlines and Southwest Airlines, and cruise operators Royal Caribbean and Carnival, saw significant gains.
Markets are heading into a week packed with major corporate earnings reports, key economic data, and an interest rate decision from the Federal Reserve. Investors are anticipating earnings from several 'Magnificent Seven' companies, including Microsoft, Amazon, Meta, and Apple. Chip stocks also showed positive movement, with Applied Materials, Western Digital, and Nvidia gaining in premarket trading.
However, concerns persist regarding debt-fueled corporate spending on technology, following recent negative cash-flow reports from Alphabet and Tesla. The intensifying competition in the semiconductor industry was highlighted by the debut of Chinese chipmaker CXMT Corp. The tech-heavy Nasdaq has fallen 8% from its record high, and the Philadelphia SE Semiconductor Index has entered bear market territory.
Traders are pricing in at least 25 basis points of rate hikes this year, with a 31% chance of a hike occurring as early as this week. Key economic data, including June durable goods orders and the Personal Consumption Expenditures Price Index, are also on the horizon. Analysts at Deutsche Bank noted the challenge policymakers face in balancing moderating inflation with the potential for higher oil prices to create a persistent inflation shock.