Key Takeaways
- Markets fell slightly amid war fears between Israel and Iran
- Oil spiked 13% last week, then pulled back slightly
- G-7, tariffs, and Fed statement could move markets next
Equity markets fell slightly last week. The S&P 500 lost 0.4% and Nasdaq Composite dropped 0.6%. The Dow Jones Industrial Average lost 1.3%, while small cap stocks turned in the worst performance for the week, falling 1.5%. The catalyst for last week’s pullback was the breakout of war between Israel and Iran. However, by Sunday night, markets were much more optimistic on prospects for a quick end.
One of the biggest movers last week was oil, which jumped 13% and closed Friday at $71.29. Much like equity markets, which seemed to firm up over the weekend, oil prices began retreating when futures markets opened Sunday. In premarket, crude oil is trading at $70.36, down 1.35%. If hostilities in the Middle East can be brought to a quick end, it would be welcome news as we’re just about three weeks away from the 90-day pause on tariffs President Trump announced back in April. Depending on what happens on the tariff front, and if those go into effect, we could see consumer prices begin moving higher. A worst-case scenario would be a combination of higher tariff-driven consumer prices and higher war-driven oil prices.
Speaking of tariffs, world leaders are gathering this week in Canada for the G-7 meeting. This could prove interesting. It’s already been decided that no joint statement will be released at the conclusion of the meetings, which is the first time it was ever decided in advance not to issue a statement. One of the main topics of discussion is likely to be trade policies. Therefore, I wouldn’t be surprised if we get some news in that area this week.
This is a shortened week with markets closed on Thursday for Juneteenth. It’s also a front-loaded week for what little economic data we have. Tomorrow, we’ll get the latest reading on Retail Sales. Then on Wednesday, the Federal Reserve Open Market Committee (FOMC) will release their statement on interest rates. According to the CME Fed Watch Tool, there is a 99.8% chance that rates will be left unchanged. As I alluded to on Friday, until we have more clarity with respect to tariffs and the situation in the Middle East, I find it highly unlikely the Fed will be able to consider cutting interest rates.
For today, I’m watching oil and news out of the Middle East. Jerusalem and Tehran are eight and nine hours ahead of Chicago time, respectively. As we get closer to darkness in those areas, we may see hostilities pick up as most of the bombings take place at night. There are no notable economic data releases scheduled for today and there are no earnings of note for the week. Therefore, I believe all eyes are on the war today. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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