Stocks Rebound as Crude Oil Weakness Knocks Bond Yields Lower

Today, the stock market experienced a rebound as crude oil prices weakened, causing bond yields to decline. The S&P 500 Index (+0.40%), Dow Jones Industrial Average (+0.13%), and Nasdaq 100 Index (+0.94%) all saw gains. E-mini S&P futures (+0.35%) and September E-mini Nasdaq futures (+0.94%) also rose. Falling crude oil prices have eased inflation expectations, leading to lower 10-year T-note yields (down by -4 basis points to 4.66%).

Chipmakers and AI-infrastructure stocks have benefited, rebounding from recent weakness. Short covering of chip stocks is occurring ahead of Nvidia's quarterly earnings. IBM recently hit a new quantum computing milestone. The US June S&P Composite-20 Home Price Index grew by 2.1% year-over-year, surpassing expectations.

US Treasury Secretary Scott Bessent announced a campaign to isolate Iran from the global economy, targeting Iran's digital assets, technology, gold, aviation, and shipping sectors. Iran warned that any support for the US economic war would be considered an act of war, and no oil would be exported through the Strait of Hormuz or throughout the Persian Gulf.

The US Energy Secretary stated that the US will play the long game with Iran, with no plans to de-escalate the conflict. This stance may limit crude supply from the Middle East. The S&P 500 is projected to earn almost 32% in Q2, significantly higher than expected. The markets anticipate a 40% chance of a +25 basis point rate hike at the next FOMC meeting.

Overseas markets also saw positive movements, with the Euro Stoxx 50 up by 0.29% and China's Shanghai Composite recovering after falling to a 2.5-week low. Interest rates in Germany and the UK declined to their lowest levels in a week.