The S&P 500 closed sharply higher Monday, lifted by investor bets that the Iran-Israel conflict could be winding down and anticipation that the Federal Reserve may soon adopt a more dovish tone.
At the close of trade, the Dow Jones Industrial Average gained 317 points (0.8%), the S&P 500 rose 1%, and the NASDAQ Composite climbed 1.4%, driven by tech stocks and easing geopolitical risk.
Mixed Signals on Ceasefire, Oil Falls
Early optimism came from reports by The Wall Street Journal and Reuters suggesting that Iran had reached out to Middle Eastern intermediaries, urging them to pressure President Donald Trump into brokering a ceasefire with Israel. Tehran, however, quickly denied these claims, calling them inaccurate.
Despite the denial, the market latched onto hopes of de-escalation. Oil prices pulled back as supply risk premium subsided, encouraging a risk-on sentiment across equities.
Fed Decision Looms, Eyes on Forward Guidance
Investors are now focused on the Federal Reserve’s two-day policy meeting, beginning Tuesday. The Fed is expected to hold rates steady around 4.5%, but investors are looking for hints of future rate cuts in response to slowing inflation and softening economic indicators.
The Fed has already cut rates by 100 basis points in 2024, but any shift in tone could impact asset pricing heading into the second half of the year. Added to the mix is political pressure from President Trump, who has been vocal in urging rate cuts to counter trade-induced uncertainty.
G7 Tensions and Manufacturing Data Ahead
Geopolitics is also playing out on another front. The G7 summit in Canada could become contentious, as Trump’s tariffs on allies have prompted Canadian Prime Minister Mark Carney to consider retaliatory measures if steel and aluminum duties aren’t lifted.
Meanwhile, U.S. manufacturing data, due later Monday, could add to market volatility depending on the strength of domestic industrial activity.
Corporate Movers: Roku, US Steel, and Sarepta in Focus
In corporate developments:
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Roku surged on news of a partnership with Amazon Ads, aimed at building the largest authenticated CTV footprint in the U.S.
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United States Steel gained after Trump approved its merger with Japan’s Nippon Steel.
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Sarepta Therapeutics tumbled following news of a second patient death related to its gene therapy Elevidys.
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