Markets Rally on Ceasefire Optimism as Fed Outlook and Geopolitical Risks Shape Sentiment

Image Source : Krish Capital Pty Ltd

Index Update:  U.S. stock futures rose, building on earlier gains as Middle East tensions temporarily eased following President Trump’s announced ceasefire between Israel and Iran, though the truce remains fragile. Investors are also awaiting Fed Chair Powell’s testimony for clues on future economic and monetary policy. On the corporate front, Nvidia shares edged higher as its CEO began selling part of his stake under a new plan, while other major tech stocks like Apple, Microsoft, Amazon, Meta, and Alphabet also traded higher in premarket activity.

Market Movers:  On Monday, the top gainers were CID HoldCo, Inc (+114.08%), followed by Cidara Therapeutics, Inc (+113.84%). On the contrary S&W Seed Company (-57.65%) and Next Technology Holding Inc (- 37.79%) declined the most the same day.

Commodities Update:  Oil prices retreated sharply as news of a ceasefire between Israel and Iran eased fears of supply disruptions and closure of the Strait of Hormuz. WTI and Brent crude futures both fell nearly 3% after initially plunging as much as 6%, with markets also reassured by emergency stockpiles from the IEA and potential output increases from OPEC+ members. However, the fragile nature of the truce kept tensions high, as Israel accused Iran of violating the agreement and warned of possible retaliation. Gold prices declined to a two-week low as demand for safe-haven assets weakened amid hopes for de-escalation in the Middle East. Although the ceasefire between Iran and Israel briefly calmed markets, reports of renewed missile launches fueled uncertainty. Meanwhile, dovish signals from the Fed, with officials hinting at a possible rate cut due to softening labor conditions and disinflation, added to market dynamics.

Macro Update:  The U.S. dollar index fell toward a three-year low as markets weighed the impact of ongoing Middle East tensions and their potential influence on Fed policy and global trade. Although a ceasefire between Israel and Iran was announced, renewed threats of strikes raised doubts about lasting de-escalation. Meanwhile, falling oil prices eased inflation concerns, strengthening expectations of multiple Fed rate cuts this year, which added pressure on the dollar.

Bonds Commentary:  The U.S. 10-year Treasury yield held near a seven-week low at 4.35% as investors weighed the fragile ceasefire between Iran and Israel and its potential impact on energy prices. Despite renewed threats of strikes, uninterrupted oil flows through the Persian Gulf eased fears of supply disruptions and inflation, keeping yields subdued. Meanwhile, expectations for a possible Fed rate cut in July grew, driven by signs of disinflation and a softer labor market.

Futures Update:  U.S. stock futures rose as investor sentiment improved following President Donald Trump’s announcement of a ceasefire between Israel and Iran. The Dow Jones Futures, S&P 500 Futures, and Nasdaq 100 Futures all posted gains, reflecting optimism that U.S. involvement in the recent Israel-Iran conflict would remain limited. Major Wall Street indices had also closed the previous session higher, supported by similar hopes for stability.

After some initial hesitation, investors regained confidence late in the day, helping Wall Street to close higher on Monday. The S&P 500 gained 57.33 points, or 0.96%, ending the session at 6,025.17. From a technical analysis standpoint, the index found support at the 20-period EMA and gradually moved higher, suggesting the potential for a short-term upward trend. Additionally, the 14-period RSI is trending in positive territory and near the mid-point, indicating room for further buying momentum and potential for the index to advance. The key support level is around 5,944, with resistance expected near 6,075.