Stocks Gain as Iran War Cools and Oil Prices Drop; Bonds Flat

Good morning,

The Dow (+0.7%), NASDAQ (+2.4%), S&P 500 (1.5%), and EAFE (3.5%) exhibited strong gains for the week. Meanwhile, taxable bonds were roughly flat and tax-free municipal bonds gained 0.4%. The 10-year Treasury yield remained unchanged at 4.45%.

Stocks rose last week following the signing of a Memorandum of Understanding between the US and Iran, which is supposed to allow oil to flow freely through the Strait of Hormuz. That caused crude oil prices to drop to about $75 per barrel, far off their peak of over $110 per barrel only a month or so ago. They aren’t quite at the pre-war level in the $60+ range, but moving in the right direction, which should ease inflationary pressure. That created optimism, particularly with international stocks, as the EAFE index jumped over 3%, as nations outside the US depend more heavily on oil imported from the Middle East.

In economic news, retail sales jumped in May, demonstrating that the consumer is resilient and continues to spend. This is good news, as consumer spending represents almost 70% of the US economy. Also last week, the new Fed Chairman Walsh led the Fed meeting and kept rates unchanged. However, several Fed committee members recommended interest rate hikes before the end of the year. Surprisingly, this was not met with a sharp selloff in bonds, implying that the prospect of rate hikes were already baked into the market. Plus, that news was offset by retail sales data, and renewed optimism about AI stocks.

Have a great day and terrific week!

^{Source: Yahoo Finance}

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^{The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}