Global equities edged higher at the start of the week, driven by bargain-hunting as investors returned to risk assets following a recent rotation out of the year's top performers. The market will be dominated by macro factors this week, with a major central bankers' conference and a slew of economic data releases on the docket. Meanwhile, heightened tensions in the Middle East over the weekend pushed oil prices higher.
As of the latest update, Dow futures are up 0.43%, S&P 500 futures have gained 0.69%, and Nasdaq futures have risen 1.07%.
In Europe, Germany's DAX index is up 0.02%, while Britain's FTSE 100 has slipped 0.08%. France's CAC 40 is down 0.20%, and the Euro Stoxx 50 is up 0.08%.
Asian markets posted modest gains, buoyed by the People's Bank of China's decision to cut a key liquidity tool rate. South Korea's KOSPI index closed 0.2% lower after a volatile session. Shares of SK Hynix Inc and Samsung Electronics Co Ltd fell 1.7% and 4.8% respectively, despite announcing a combined memory expansion plan worth about 1.3 trillion dollars. Japan's Nikkei 225 closed 0.15% higher, Hong Kong's Hang Seng Index jumped 1.95%, and China's Shanghai Composite Index gained 1.2%.
Bargain Hunting Lifts Stocks
S&P 500 futures are up 0.7% and Nasdaq 100 futures have advanced 1.1% as traders buy the dip. Artificial intelligence infrastructure-related stocks are leading pre-market gains, with NVIDIA Corp shares up about 1.2% before the bell. This follows a rotation out of popular tech stocks that contributed to the S&P 500 posting its second-largest weekly decline of the quarter last week.
With the S&P 500 on track for one of its strongest quarterly performances since 2020, a major debate is how much further the rally in semiconductor and AI leaders can go after a near one-way ascent.
Guy Miller, Chief Market Strategist at Zurich Insurance, suggested the move looks more like a sector rotation than a broad-based sell-off. He pointed out that a significant supply-demand imbalance in the semiconductor sector continues to support robust corporate earnings.
Caution Over AI Froth
A Wall Street macro strategist noted that while investors still acknowledge the fundamental support for equities, they are beginning to express this view more cautiously. This prudence helps, to some extent, in avoiding excessive optimism or bubble risks. Overall, improving market breadth, retreating yields, and the persistence of investment discipline suggest stocks still have room to run higher.
The Bank for International Settlements (BIS) warned that the current AI investment boom carries risks of overextension, similar to historical cyclical bubbles.
Jose Torres, an economist at Interactive Brokers, stated that rising modern infrastructure costs are pressuring corporate balance sheets, which could amplify risks if investment returns fall short. He observed that traders have recently shown a preference for defensive and cyclical sectors.
US and Iran Agree to Halt Retaliatory Actions
Oil prices also moved higher, with Brent crude rising 1.4% to around $73 per barrel. This followed renewed US-Iran tensions after an attack on a supertanker near the Strait of Hormuz, stoking concerns over the safety of this critical shipping lane. Although the US and Iran subsequently agreed to pause reciprocal retaliatory actions, shipping through the strait has slowed noticeably, with shipowners generally exercising caution. A report cited US officials saying normal shipping operations are expected to resume.
Soojin Kim, a strategist at MUFG, noted that while commercial shipping is expected to gradually recover as peace talks progress, traffic through the Strait of Hormuz remains below normal levels. With geopolitical risk premiums receding and supply recovering, oil prices may continue to face downward pressure.
Mohit Kumar, Chief European Economist at Jefferies, said lower oil prices help alleviate pressure on the global economy. He pointed out that cheaper oil could lead to a "rotation trade," where previously pressured growth-sensitive sectors may outperform.
Focus on Central Bank Conference and Jobs Data
This week, traders will shift their focus to the annual central banking conference in Portugal, which will gather governors from multiple nations. Federal Reserve Governor Christopher Waller will make his first public appearance overseas, with the market keenly watching for any hints on the interest rate path and discussions around financial stability, particularly potential risks related to the AI boom.
Additionally, Thursday's release of the US monthly employment report will be a key data point, serving as the capstone for a series of labor market indicators.
The week is packed with employment data, including JOLTS job openings, the ADP employment report, and weekly initial jobless claims, with the ultimate focus on the Non-Farm Payrolls report due Thursday. Markets will be closed on Friday for the US Independence Day holiday.
Andrea Gabellone, Global Head of Equities at KBC Securities, remarked that following the Fed's hawkish pause this month, a cooling of risk appetite was expected, but this has not materialized. He believes the market still holds faith in the persistence of "American exceptionalism," which could mean the rally may broaden to more sectors.
Markets Bet on Fed Rate Hikes
US Treasury yields are rising, with more pronounced gains at the short end, indicating markets are still betting the Federal Reserve may hike further. The 2-year yield is up 1.6 basis points to 4.103%, while the 10-year yield has risen 2 basis points to 4.38%.
Deutsche Bank's Jim Reid noted that the bank's economists still expect a relatively hawkish policy path ahead, forecasting two potential rate hikes later this year. However, short-term policy guidance is limited, and markets remain largely data-dependent.
European government bond yields are slightly higher. Markets are watching oil prices, inflation, and discussions at the European Central Bank's Sintra conference in Portugal. Germany's 10-year bund yield has climbed to 2.859%.
Yen Nears 40-Year Low
The US dollar is largely flat. The Dollar Index stands at 101.25, slightly below the one-year high touched last week. Markets continue to price in the possibility of the Fed hiking again as early as September.
The Japanese yen is slightly weaker at 161.80 per dollar. Concerns over potential US-Japan intervention are keeping it from breaking below its 40-year low.
Investors are now pricing in at least one Fed rate hike this year, a shift from expectations of two cuts before the conflict. Bank of America strategists even forecast the potential for three hikes, primarily based on strong US jobs data.
Gold Under Pressure
Gold is weakening due to falling inflation expectations and easing geopolitical risks. New York gold futures are down 0.4% to $4,078.30 per ounce. Gold mining stocks are also weaker, with Endeavour Mining PLC down 2.05% and Fresnillo PLC down about 1%. MUFG stated that with risk premiums declining and energy-driven inflation expectations weakening, gold prices remain under pressure.
The Bank for International Settlements (BIS) sounded a triple alarm: AI bubble risks, the specter of inflation, and high debt pressures.
In its annual report, the BIS warned that the potential bursting of the current AI bubble, recurring inflation, and fiscal pressures have become three major "risk flashpoints" threatening global economic prosperity.
The Basel-based institution noted these pressure points "require urgent attention," as underlying vulnerabilities accumulating in the financial system could amplify any sudden shocks.
The BIS stated bluntly in the report: "The global economy is caught between progress and peril, with resilience being tested increasingly severely." The report's release coincides with the eve of the European Central Bank's annual symposium in Sintra, where global policymakers will intensively assess such stability risks.
'Prophet' Speaks Again: Bitcoin 'Will Go to Zero'!
Jeremy Grantham, the veteran investor famed for predicting the 2000 dot-com bubble burst and the 2008 housing crash, has again voiced his long-standing skepticism towards cryptocurrencies.
He stated bluntly that Bitcoin (BTC) "will go to zero," calling it "a bunch of nonsense that is completely unnecessary" with "no practical use other than to facilitate criminals moving money and avoiding detection."
Grantham said he has never owned Bitcoin personally and has no plans to do so. The billionaire also emphasized that these comments represent his personal views and not the stance of GMO, the Boston-based asset management firm he co-founded, which manages around $80 billion.
'Defensive Signal' Flashes! BofA Warns of Summer 'Dip' for US Stocks: S&P 500 Could Fall Below 7000
Paul Ciana, a technical strategist at Bank of America, warned that after a strong rally in the first half of 2026, the US stock market could enter a correction phase in the third quarter.
Although the bank still believes US stocks could strengthen by year-end, its technical indicators suggest investors should prepare for increased market volatility, implement risk control strategies, and expect a more challenging summer environment for equities.
Bank of America's third-quarter technical outlook report, released on June 25, shows the bank maintains a cautious stance on several major asset classes: US stocks may see a pullback, the US dollar could strengthen against other currencies, and oil prices may retreat to a lower trading range.
Stocks in Focus
Comcast Corp announced it will spin off its media division, which includes Universal Studios and Sky, sending its shares soaring 20%. The spin-off is expected to take about a year to complete. Comcast's Co-CEO Mike Cavanagh will lead Universal Studios, while former CFO Michael Angelakis will serve as CEO of the telecom parent company.
Shares of both Rocket Lab USA Inc and Iridium Communications Inc surged after Rocket Lab announced its acquisition of Iridium. Rocket Lab stated the merger will combine its launch capabilities with Iridium's satellite communications network. Rocket Lab shares gained over 10%, while Iridium shares jumped more than 20%.
Following Nasdaq's announcement on Friday that SpaceX will be added to the Nasdaq 100 Index before the open on July 7, the stock rose 2%. The inclusion is expected to trigger a wave of passive buying by various exchange-traded funds (ETFs).
Home internet provider Charter Communications Inc is in exclusive talks with SpaceX regarding a consumer-facing phone product, sending its shares up nearly 20%. Reports suggest Charter could leverage its ground-based internet infrastructure to carry some of SpaceX's mobile traffic for individual users.
Alphabet Inc (Google's parent) rose about 1%. As one of the "Magnificent Seven" tech giants, the company will officially join the Dow Jones Industrial Average for trading on Monday, replacing Verizon Communications Inc as one of the 30 blue-chip components.
Verizon Communications Inc expects a second-quarter loss of $700 million to $800 million, with its stock down 0.5%. The loss expectation stems from the company classifying related operations under its joint venture with UK telecom group BT Group as held for sale.
Martin Marietta Materials Inc announced a $13.5 billion cash acquisition of the North American business of Lime Group, sending its shares down nearly 3%. The natural resource building materials company stated the acquisition will help Lime Group expand its industrial minerals portfolio.
Oracle Corp shares rose 3%, rebounding at the start of a shortened trading week after experiencing its worst week since 2001. Last week, Oracle shares plunged 19% cumulatively amid market concerns over its debt burden and whether its AI strategy investments will deliver returns.
TeraWulf Inc shares gained 3% after Citigroup initiated coverage with a Buy rating. The bank's analysts stated that TeraWulf is addressing key bottlenecks in data center power supply, making it a compelling investment in the AI space.
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