US equities rallied broadly on Monday after the United States and Iran reached a deal to end their war, while crude oil tumbled more than 5% and a key regional manufacturing gauge came in well below expectations.

Key Highlights

  • The Nasdaq Composite rose 2%, the S&P 500 gained 1.54%, and the Dow added 1.13%.
  • Crude oil tumbled more than 5% after the US and Iran reached a deal to end their war.
  • Technology shares jumped 2.8%, while energy stocks fell 3.5% on the day.
  • The Empire State Manufacturing Index fell to 5.7 in June from 19.6 in May, missing forecasts of 13.2.

Major US stock indexes advanced sharply on Monday as news of a peace agreement between the United States and Iran reduced geopolitical risk premiums that have weighed on markets for months. The Nasdaq Composite led gains with a 2% rise, while the S&P 500 added 1.54% and the Dow Jones Industrial Average gained 1.13%.

Sector performance reflected the nature of the catalyst. Technology shares jumped 2.8%, benefiting from a broad reduction in risk aversion and renewed appetite for growth names. Energy stocks moved in the opposite direction, falling 3.5% as crude oil prices tumbled more than 5% on expectations that the agreement would lead to the reopening of the Strait of Hormuz and a gradual return of Middle East supply to global markets.

Adding a separate thread to the day's narrative, the Empire State Manufacturing Index, a regional gauge of factory activity compiled from a survey of New York State manufacturers, fell sharply to 5.7 in June from 19.6 in May, missing economist forecasts of 13.2. The new orders component slowed markedly to 3.5 from 22.7, while the six-month outlook for business activity eased to 30.1 from 33.5. Price indicators remained firm, with the prices paid index at 61.0 versus 62.6 the prior month.

While the manufacturing data pointed to a cooling in factory-sector momentum after two unusually strong months, the reaction in equity markets was dominated by the geopolitical development. The divergence between rallying tech and equity indexes on one hand, and a sharply lower energy sector and softer manufacturing data on the other, illustrates how a single geopolitical catalyst can produce starkly different outcomes across asset classes and sectors on the same trading day.