US stock indices closed mixed on Tuesday as oil prices tumbled sharply. Following the Bank of Japan's rate hike to a 31-year high, investor focus shifted to a packed week of central bank policy decisions. This week's Federal Reserve meeting will be the first under its new Chair, with markets widely expecting the Fed to hold rates steady on Wednesday. Attention will center on how the Chair navigates the policy balance between inflation pressures and easing energy inflation in the post-meeting press conference.
In the stock market, the Dow Jones Industrial Average rose 328.64 points, or 0.64%, to close at 51,999.67. The Nasdaq Composite fell 307.60 points, or 1.15%, to 26,376.34. The S&P 500 index declined by 42.94 points, or 0.57%, to finish at 7,511. Shares of SpaceX (SPCX.US) surged as much as 17% during the session before closing up 4.8%. Marvell Technology (MRVL.US) dropped nearly 10%, and Micron Technology (MU.US) fell 6%. The Nasdaq Golden Dragon China Index declined 2.5%, with shares of XPeng (XPEV.US) down over 4%.
In European markets, Germany's DAX 30 index added 7.74 points, or 0.03%, to 24,911.16. The UK's FTSE 100 index gained 63.75 points, or 0.61%, to 10,494.37. France's CAC 40 index rose 63.26 points, or 0.75%, to 8,447.27. The Euro Stoxx 50 index increased 26.72 points, or 0.43%, to 6,256.15. Spain's IBEX 35 index advanced 121.66 points, or 0.64%, to 19,153.66. Italy's FTSE MIB index climbed 595.55 points, or 1.15%, to 52,431.50.
In Asian markets, Japan's Nikkei 225 index rose 0.13%, South Korea's KOSPI index gained 2.11%, and India's Sensex index increased 0.71%.
The US Dollar Index, which measures the dollar against a basket of six major currencies, fell 0.09% to settle at 99.540. By the close of New York forex trading, one euro bought $1.1610, up from $1.1595 the previous session. One British pound bought $1.3429, up from $1.3419. The dollar traded at 160.44 Japanese yen, up from 160.31 yen. It traded at 0.7931 Swiss francs, down from 0.7940 francs, and at 1.3993 Canadian dollars, up from 1.3987. The dollar traded at 9.3618 Swedish krona, down from 9.3913.
In cryptocurrencies, Bitcoin fell 0.67% to $65,765.67, while Ethereum rose 0.33% to $1,795.82.
Oil prices plunged. The price for West Texas Intermediate crude for July delivery fell by $4.70, or 5.82%, to settle at $76.05 per barrel. The price for Brent crude for August delivery dropped by $4.21, or 5.06%, to settle at $78.96 per barrel.
Spot gold advanced to $4,331.03 per ounce. Spot silver was at $70.031 per ounce.
Key Macroeconomic Developments
Iran's Vice President stated that Tehran will maintain control over the Strait of Hormuz. According to reports, Iran's First Vice President Mohammad Reza Aref said that Tehran will retain control of the Strait of Hormuz and noted that vessels using this strategic waterway should pay fees for the security services Iran provides. A statement from the presidential office quoted Aref telling officials on Tuesday that "the Strait of Hormuz belongs to Iran, and its management will remain with Iran." He added that Iran has made significant sacrifices in its history to secure its rights in the strait and is now trying to fully enjoy those rights. The essential services Iran provides help ensure the safe passage of vessels through the channel, and without such measures, ships could face risks including mines and resulting environmental damage.
US import prices in May posted their largest year-on-year increase in nearly four years. US import prices rose sharply in May, driven by surging costs for computer equipment, plastics, and air travel, further showing the inflationary impact from conflicts and data center construction. Data released Tuesday by the Bureau of Labor Statistics showed the import price index rose 1.9% in May, matching April's increase. Import prices were up 6.7% year-on-year, the fastest pace in nearly four years. The price of imported plastic materials, a key raw material for many consumer goods produced from fossil fuel byproducts, rose 6.5%, one of the largest monthly increases on record. The category for imported air passenger fares, which feeds directly into the Fed's preferred inflation gauge, also saw a significant increase. Meanwhile, prices for imported computers, peripherals, and semiconductors rose 3.6% in May, the second-largest monthly increase since monthly data began in 1994. Tuesday's report and recent economic data show conflicts are impacting the US economy. As inflationary pressures spread from the initial oil price shock to broader areas, consumer and producer prices have risen noticeably in recent months.
US housing starts in May fell to their lowest level in six years. The pace of new home construction in the US slowed to its weakest level in six years, dragged down by a sharp drop in apartment projects. Government data released Tuesday showed housing starts fell 15.4% in May to a seasonally adjusted annual rate of 1.18 million units, below market expectations. The decline was primarily due to a 40.2% plunge in starts for multi-family housing projects. Starts for single-family homes also fell 1.9% to an annualized rate of 882,000 units. The report indicates builders remain cautious amid weak housing demand, continuing to work through inventories of unsold new homes. Many developers are offering price cuts and mortgage rate subsidies to attract buyers while also reducing construction of "speculative homes," built before a sales contract is signed. The total number of building permits, an indicator of future construction activity, fell 0.7% in May to an annualized rate of 1.41 million units.
Reports indicate the US will allow Iran to immediately resume oil export sales. According to reports citing informed sources, under an agreement, the US will allow Iran to immediately resume sales of oil and fuel, providing Tehran with an upfront economic incentive to encourage de-escalation. Provisions in the agreement to exempt oil sales from sanctions will take effect immediately upon the deal's signing this week. Concurrently, exemptions for necessary services supporting oil sales, such as banking, shipping, and insurance, will also be granted to ensure transactions can proceed smoothly. The advocacy group United Against Nuclear Iran stated that a supertanker loaded with Iranian crude left Chabahar port, crossed the US blockade line, and sailed out of the Gulf of Oman on Tuesday with its vessel tracking system activated. This marks the first such occurrence since the US imposed its maritime blockade in April. A senior US official said Tuesday that while Iran will receive upfront sanctions relief for oil sales, long-term and sustained relief will depend on Iran meeting US demands, including opening the strait and addressing nuclear program issues. The official added that Iran will still not immediately gain access to tens of billions of dollars in frozen funds held overseas.
Notable Company Updates
Apple (AAPL.US) plans to launch new AirPods equipped with cameras by the end of 2027, alongside several other new products including a next-generation foldable phone and a special 20th-anniversary iPhone. The new AirPods will be Apple's first wearable device focused on artificial intelligence, featuring a computer vision camera as a sensor to provide Siri with real-world visual information. Apple is also developing chips built on next-generation process technologies for its future devices and is planning to launch its first smart glasses as early as the end of next year.
SpaceX (SPCX.US) options saw intense trading activity on Tuesday, becoming one of the hottest options contracts in the US market, helping push the company's shares up as much as 17% in early trading on its third day of public trading. By 10:35 AM New York time, SpaceX options volume had exceeded 600,000 contracts, making it the third-most actively traded single-stock option in the US. Chris Murphy, co-head of derivative strategy at Susquehanna International, stated, "Option volatility is clearly skewed to the upside, with investors willing to pay higher prices to participate in further short squeezes post-listing." According to Murphy's data, a key gauge of options demand, implied volatility, opened at elevated levels, with three-month implied volatility reaching around 110% to 115% in early trading. The most actively traded contract was the $220 strike call option expiring Thursday, with volume of 25,000 contracts representing 2.5 million shares. Jake Taylor, head of US single-stock options at Optiver, noted, "Given the extraordinary level of investor interest, we expect participation from both institutional and retail investors. Market activity and volatility will remain high as the market is still forming its judgment on the company's valuation and prospects."
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