US stock index futures are showing mixed performance as investors await the Federal Reserve's policy decision and guidance on the interest rate outlook, while oil prices stabilize after a recent string of declines. Growing expectations for cooling inflation are pushing global bond yields lower.
As of the latest update, Dow futures are down 0.02%, S&P 500 futures are up 0.05%, and Nasdaq futures have gained 0.41%.
In European markets, the pan-European STOXX 600 index is up 0.1%, hovering near record highs, while the UK's FTSE index shows slight weakness. Shares of Bayerische Motoren Werke AG (BMWYY) fell as much as 12% at one point after the company lowered its performance outlook and warned of weak demand in China and impacts from the Middle East situation. Germany's DAX index is down 0.15%. France's CAC 40 is up 0.1%, Italy's FTSE MIB and Spain's IBEX 35 are down 0.1%, and the Dutch AEX is up 0.2%.
In Asian markets, the MSCI Asia Pacific ex-Japan index rose 0.4%, Japan's Nikkei 225 gained 0.7%, and South Korea's KOSPI surged 1.6% to another all-time high, led by AI-related stocks, with SK Hynix Inc jumping 5.8%.
Oil Prices Dip Below $80
Brent crude oil is stabilizing slightly after falling for four consecutive sessions, having previously dropped below $79 per barrel, down more than a third from recent highs. WTI crude is down 0.8% to $75.46. Both benchmark oil prices fell more than 5% in the previous session, closing at their lowest levels in three months. Market reports suggest the US may ease sanctions on Iranian oil under a framework for ending the war, potentially releasing more supply.
Simultaneously, data firm Kpler stated that at least two very large crude carriers (VLCCs) linked to Iran and carrying Kharg Island crude have reportedly crossed the US naval blockade line, possibly indicating coordinated shipping activity has begun even before formal sanctions are lifted.
Westpac economist Luka Belobrajdic noted that Iranian export volumes could equate to about 2% of global demand, but any sanctions relief is unlikely to happen immediately and would depend on the sustainability of peace.
Global X Management investment strategist Billy Leung said the fall in oil prices is delivering a "material inflation cooling shock," making the overall macro environment significantly more dovish over the past 48 hours.
Geopolitically, the US and Iran are preparing to sign a memorandum of understanding in Switzerland on June 19th, though parties remain cautious about a return to normal transit speeds through the Strait of Hormuz.
Markets are betting that a US-Iran deal and the reopening of the Strait of Hormuz will increase supply, thereby easing inflationary pressures and prompting investors to reassess the global interest rate outlook.
Global Bond Market Rebounds
Expectations for additional supply have boosted optimism for a resumption of Middle Eastern exports, while also pushing US Treasury yields lower and lifting global bond markets, even though the conflict had previously led to a significant drawdown of strategic petroleum reserves.
The bond market is leaning slightly dovish. The yield on the 10-year US Treasury note fell 1 basis point, nearing a one-month low and down about 23 basis points from its May peak. Benchmark yields in Europe and Asia also retreated.
In European bond markets, Germany's 10-year bund yield fell for a fifth consecutive session, touching its lowest level since early April. UK gilt yields also retreated notably after UK inflation unexpectedly held steady at a 13-month low of 2.8%, with markets anticipating the Bank of England's next policy decision.
The US dollar is broadly stable. The Dollar Index is at 99.554, largely flat. Analysts at Commerzbank noted that Fed Chair Walsh is unlikely to directly support rate cuts in the near term. The key for the dollar's trajectory will be whether he describes the energy shock as a short-term factor and avoids fueling expectations for rate hikes.
Walsh May Break from Predecessor's Tradition
Currently, there is still significant divergence in expectations for the Fed's future path, ranging from rate cuts to multiple hikes. However, it is widely expected that policymakers will hold rates steady this time. Investors will focus on parsing the remarks from Kevin Walsh following his first meeting as Chair. Most analysts remain divided on whether the Fed will maintain a "dovish bias." US May retail sales data will also be a key macro focus.
Investors are closely watching for changes in the Fed's communication style. Bloomberg Economics suggests that new Chair Walsh may not submit a personal interest rate forecast in the dot plot, which would break from the tradition of his predecessors.
An analyst at Carmignac pointed out that the main highlight of this meeting is Walsh's first press conference.
Bank J Safra Sarasin strategist Wolf von Rotberg noted that Walsh needs to balance political pressure from President Trump, who desires rate cuts, with market trust in maintaining central bank independence. He also believes that sticky US inflation pressures and robust economic growth naturally bias policy towards a hawkish stance.
Crypto and Precious Metals
Bitcoin is stabilizing above $64,000. The broader market is still awaiting the Fed's policy decision and Walsh's comments in the press conference.
Regarding gold, prices have steadied above the $4,000 support level to around $4,325. Analysts at Mitsubishi UFJ Financial Group Inc noted that easing inflation pressures are typically negative for gold, but geopolitical uncertainty and cautious sentiment continue to provide support.
IEA Warning: Oil Market Could Slide Into 'Significant Surplus' by 2027
The International Energy Agency (IEA) stated in a report on Wednesday that the oil supply shock triggered by the Iran war has somewhat weakened global crude demand. If a lasting resolution to the conflict is achieved, supply could rebound sharply, potentially creating a significant oil surplus next year. In its latest monthly Oil Market Report, the IEA slashed its forecast for 2026 global daily demand growth to 1.1 million barrels per day, a reduction of 700,000 barrels per day compared to last month's forecast.
The report noted that a sharp 5 million barrel per day drop in global oil deliveries in the second quarter of this year is the main reason for this downgrade. Meanwhile, global oil production fell to 94.5 million barrels per day in May, down 600,000 barrels per day month-on-month and significantly lower by 13.6 million barrels per day compared to pre-war levels.
The IEA expects global daily supply in 2026 to decrease by 3.9 million barrels year-on-year to about 102.4 million barrels, but to rebound strongly to 110.3 million barrels by 2027. The agency emphasized that the demand decline reflects dual pressures from high fuel prices and shortages of refined products, highlighting that the impact of this geopolitical conflict is no longer confined to a simple supply-side shock.
However, the IEA also stated that by 2027, global supply is projected to increase substantially by about 8 million barrels per day to around 110 million barrels per day, far exceeding the modest recovery in daily demand, which is expected to grow by only 2 million barrels to 105.3 million barrels by then.
Citadel Securities Warning: Fed Could Tighten by 75 Basis Points This Year
Citadel Securities indicated that as inflation pressures become increasingly stubborn and broad-based, the likelihood of the Fed initiating consecutive rate hikes as early as September is rising.
The firm's head of macro strategy, Frank Fleit, stated in a client note that although oil prices have retreated after a provisional US-Iran peace deal, the inflation pressures accumulated during the geopolitical conflict have become entrenched.
He further pointed out that persistently loose financial conditions, supply chain bottlenecks not yet fully resolved, a re-accelerating labor market, and the emergence of an AI investment boom are multiple factors combining to keep price pressures elevated.
In this context, Fleit expects Fed Chair Walsh to signal a more hawkish stance at his first policy meeting this Wednesday, with the risk of rate hikes gradually accumulating for the September, December, and March 2027 meetings. This outlook is more aggressive than current market pricing—interest rate swap contracts indicate the market sees only about a one-third probability of a hike in September.
Wall Street Debates the Path for US Stocks! Optimists See S&P 500 at 9000, Bears Warn Rally Faces Multiple Tests
Investment bank Evercore ISI maintains its positive outlook on US equities. The firm believes that the substantial cash reserves held by investors could continue to support the rise in US stocks and expects that, in an optimistic scenario, the S&P 500 could potentially reach 9000 points by the end of this year.
"Wall Street veteran" Yardeni and JPMorgan Asset Management both believe that strong corporate earnings growth will continue to support the stock market. However, an increasing number of Wall Street institutions, including Citadel Securities and PGIM, are beginning to issue warnings about the future trajectory of risk assets.
With Middle East geopolitical risks temporarily receding, US stocks may face a real test.
Stocks in Focus
CarMax, Inc reported first-quarter earnings and revenue that exceeded market expectations, with its stock rising over 3.5%. CarMax reported earnings per share of $1.31, significantly higher than the Refinitiv (LSEG) survey analyst consensus estimate of $0.95.
AST SpaceMobile, Inc announced on Wednesday the successful deployment of three new satellites into their intended orbits to continue building its space-based cellular broadband network. Boosted by this positive news, the stock surged 6%. The launch was carried out by a Space Exploration Technologies Corp (SpaceX) Falcon 9 rocket, and shares of SpaceX also rose nearly 3%.
La-Z-Boy Incorporated disclosed that its fourth-quarter retail sales rose 11% year-on-year, with earnings beating expectations and revenue largely in line with the FactSet market consensus. The stock soared 16% in response.
Netflix, Inc denied market rumors of its interest in acquiring Lions Gate Entertainment Corp, sending the media company's stock down over 5%. The stock had surged nearly 14% on Tuesday on the potential acquisition news.
A sell-off hit several semiconductor stocks on Tuesday as investors considered rotating out of the red-hot chip sector, which has been strong since 2026; the sector rebounded on Wednesday. Intel Corporation plunged 8.5% on Tuesday but gained over 3% in pre-market trading Wednesday. Advanced Micro Devices, Inc (AMD) rose over 2.5% on Wednesday, while Broadcom Inc and QUALCOMM Incorporated both gained over 1.5%.
Citigroup Inc initiated coverage on Figma, Inc with a Buy rating, pushing Figma's stock up 4%. The bank's research report stated that Figma's total addressable market is as large as $250 billion, and industry penetration remains in its early stages, leading the analyst to be bullish on the stock's future performance.
Media outlet Business Insider reported that Microsoft Corporation terminated talks for a $3 billion deal to lease Oracle Corporation cloud infrastructure due to security concerns. Oracle stated the report was inaccurate, and its stock fell slightly by 1%. Oracle emphasized that Microsoft remains a partner and customer.
Despite Jabil Inc reporting third-quarter earnings and revenue that beat expectations, and providing guidance for the current quarter and full year that also exceeded market forecasts, its stock still fell over 2%.
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