US stock indices closed in negative territory on Friday, with the S&P 500 ending below its 50-day moving average for the first time since April. The decline followed a US military strike on Iran, which was launched after the US President accused Iran of a drone attack on a vessel in the Strait of Hormuz, calling it a "foolish violation" of a ceasefire. The strike occurred over a week after the President and the Iranian leader signed a memorandum of understanding aimed at establishing a permanent peace agreement to end hostilities between the two nations. The Vice President had traveled to Switzerland the prior weekend for talks with Iranian officials regarding the deal. Following the strike, Iran's Islamic Revolutionary Guard Corps stated, "We announce retaliatory action against the US military strike on Sirik Island."
For the week, the S&P 500 fell approximately 1.9%, the Dow Jones Industrial Average gained about 0.4% for its third consecutive weekly advance, and the Nasdaq Composite dropped roughly 4.4%. Oracle (ORCL) shares plunged 19.4% this week, marking its worst weekly performance since the low point of the dot-com bubble burst in August 2001, as investor concerns over its AI-related financing intensified. In its latest fiscal year, the company's capital expenditures surged by 162%, free cash flow showed a deficit of nearly $24 billion, and its debt load reached approximately $130 billion.
Market Performance Details
The Dow Jones Industrial Average fell 44.51 points, or 0.09%, to close at 51,876.11. The Nasdaq Composite declined 60.99 points, or 0.24%, to finish at 25,297.62. The S&P 500 index dropped 3.47 points, or 0.05%, ending the session at 7,354.02.
Semiconductor and memory-related stocks were notably weak. Western Digital Corp. (WDC) fell 13%, Seagate Technology Holdings PLC (STX) dropped 12%, SanDisk (SNDK) declined 10%, Micron Technology Inc. (MU) slid 6.6%, and QUALCOMM Incorporated (QCOM) was down 7%.
European and Asian Market Moves
In Europe, Germany's DAX 30 index fell 328.90 points, or 1.32%, to 24,671.64. The UK's FTSE 100 index declined 19.23 points, or 0.18%, to 10,510.66. France's CAC 40 index dropped 46.74 points, or 0.55%, to 8,384.87. The Euro Stoxx 50 index decreased 45.53 points, or 0.73%, to 6,222.00. Spain's IBEX 35 index fell 75.13 points, or 0.39%, to 19,438.47. Italy's FTSE MIB index lost 480.41 points, or 0.93%, to 51,302.50.
In Asia, Japan's Nikkei 225 index fell 4.15%, while South Korea's KOSPI index dropped 5.81%.
Currency and Commodity Markets
The US Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.07% to settle at 101.357. By the close of New York trading, one euro could buy $1.1386, up from $1.1373 previously. One British pound traded at $1.3200, up from $1.3198. The dollar bought 161.74 Japanese yen, down from 161.80, and traded at 0.8097 Swiss francs, down from 0.8098. It also fetched 1.4192 Canadian dollars, down from 1.4197, and 9.7409 Swedish kronor, up from 9.7352.
In cryptocurrencies, Bitcoin hovered near the $60,000 level, trading around $60,060 at the time of writing. Ethereum was priced at approximately $1,577.16.
Oil prices fell significantly as the market focused on easing Middle East geopolitical tensions and prospects for increased supply. The front-month contract for New York crude futures closed below $70 per barrel for the first time since March. At settlement, August West Texas Intermediate crude fell $2.69, or 3.74%, to $69.23 per barrel. August Brent crude dropped $3.27, or 4.34%, to $71.99 per barrel.
Spot gold rose 1.52% to $4,087.84 per ounce, while spot silver gained 2.28% to $59.186 per ounce.
Key Macroeconomic Developments
US Central Command stated that forces struck Iran on June 26th in response to an attack on a merchant vessel the previous day. The US accused Iran of attacking the cargo ship 'Ever Lovely' with a one-way attack drone on June 25th. US military aircraft subsequently struck Iranian missile and drone storage facilities and coastal radar sites. The US stated that Iran's unprovoked attacks on merchant vessels clearly violated the ceasefire and endangered the freedom of navigation in a vital international trade corridor. US forces will continue to coordinate and support safe passage for merchant vessels and remain vigilant to ensure agreements with Iran are upheld.
Separately, the US President threatened European nations via social media, stating that any country implementing a digital services tax on US companies would face an immediate 100% tariff on all its goods exported to the US, overriding any existing or pending trade agreements.
A Federal Reserve official indicated that signs of widespread inflation led him to project one interest rate hike this year in the latest economic forecasts. He expressed concern about inflation pressures beyond the Middle East conflict, noting that the war has pushed up oil prices and contributed to increases in many other categories. This has heightened concerns among some Fed officials that inflation is more broad-based and persistent, potentially requiring stronger action from the central bank. The core PCE price index rose 4.1% year-over-year in May, its largest increase since April 2023. Half of the Fed officials who submitted projections in the recent dot plot forecast at least one rate hike this year.
The final reading for the University of Michigan's Consumer Sentiment Index in June came in at 49.5, up from a preliminary 48.9 and showing an improvement of about 10% from May, boosted by falling gasoline prices. Sentiment improved across income, wealth, and political groups. Expectations for business conditions over the next five years surged 16%, suggesting consumer worries about the long-term effects of the Iran conflict may be easing. However, the index remains in unfavorable territory, down 13% from its pre-conflict level in February and nearly 20% lower than a year ago. The cost of living remains the top concern for consumers, with over half citing high prices as a strain on their finances for the third consecutive month. One-year inflation expectations edged down to 4.6% from 4.8% in May but remain elevated, significantly above the 3.4% level seen before the conflict. Long-term inflation expectations fell to 3.3% in June from 3.9% in the prior month but remain slightly above the 2024 range of 2.8% to 3.2%.
Notable Corporate News
OpenAI is reportedly considering an initial public offering as early as 2027, according to sources familiar with the matter. This timeline could see its AI rival, Anthropic, potentially going public first. Both companies are said to have confidentially filed paperwork with the SEC, but OpenAI's management reportedly expects Anthropic to lead the way. Earlier reports suggested OpenAI was targeting a fall listing this year, while Anthropic was considering an IPO as soon as October. Sources indicated that recent volatility in tech stocks has impacted OpenAI's timing. Discussions are ongoing and details could change.
Meta Platforms Inc. (META) CEO is reportedly urging executives to explore partnerships with prediction market platforms Polymarket and Kalshi. Meta is developing its own similar application called Arena, where users could place bets on a wide range of events. As the prediction trading sector grows, Meta aims to capture a share. Internal executives note that Arena, which would use virtual points similar to gaming credits rather than real money, is fundamentally different from cash-based platforms like Polymarket and Kalshi. According to sources, the CEO has made Arena a top priority with a broader strategic vision than previously understood and has directed executives to initiate talks with the two platforms, though the form of any potential cooperation remains undetermined.
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