Three U.S. indices rose for the second week in a row: investors are expecting inflation to ease

Major U.S. market indices closed higher for the second consecutive week: On Friday, June 19, U.S. stock exchanges will be closed for a holiday. On Thursday, Wall Street recouped the losses it had suffered the previous day following the Fed meeting: stocks and bonds rose after a peace agreement between the U.S. and Iran bolstered investors’ hopes that the resumption of shipping through the Strait of Hormuz would reduce inflationary risks, according to Bloomberg.

— The S&P 500 broad-market index rose 1.1% and closed at 7,500.67 points. For the week, it gained 0.9%.

— The Dow Jones Industrial Average, a blue-chip index, rose 0.1% to 51,565.26 points. Earlier this week, it rose above 52,000 points for the first time. From June 15 to 18, the index rose 0.7%.

— The Nasdaq Composite technology index surged 1.9% over the course of the day, closing at 26,517.93 points. Its weekly gain was 2.4%.

— The Russell 2000 Small- and Mid-Cap Index rose 1.8% to reach a new all-time high of 2,970.37 points. Over the week, the Russell 2000 gained nearly 1.2%.

— Oil prices fell by about 0.3%: futures for the benchmark Brent crude were trading at $79 per barrel, while North American WTI was trading at about $76 per barrel.

— The dollar strengthened by 0.75% against a basket of other world currencies, reaching its highest level in more than a year.

— Gold reacted to the dollar's rise by plummeting 3.3% to $4,236 per ounce.

— Bitcoin fell 1.9% over the past 24 hours, dropping to $62,900 per token.

The market is counting on inflationary pressures to ease following the signing of the so-called memorandum of understanding between the U.S. and Iran, Bloomberg explains. This document obligates the parties to abide by the peace agreement, restore shipping traffic in the Strait of Hormuz, and resolve the remaining disputes within 60 days. Among these issues is the future management of this waterway—specifically, whether Iran will be able to charge fees for ships passing through the strait.

U.S. Vice President Jim Vance assured that such tariffs would not be imposed, otherwise “there will be no final deal.” He also reported that tankers have already begun crossing the Strait of Hormuz. Nearly all analysts note that shipping will not return to normal immediately and that it will take time for supplies to resume. However, if the peace agreement is upheld, it could significantly ease pressure on energy prices and inflation in general.

Against the backdrop of an improving situation in the Persian Gulf, several oil- and energy-related ETFs posted their worst weekly performance in a year or more, according to MarketWatch. The United States Oil Fund fell 10.8%, while the VanEck Oil Services ETF, the iShares Global Energy ETF, and the Energy Select Sector SPDR Fund also plummeted.

Inflation risks have taken on particular significance following the latest meeting of the U.S. Federal Reserve, at which the central bank—and its new chair, Kevin Warsh, in particular—pledged to restore price stability. Although the Fed kept rates unchanged, its updated projections showed that nearly half of its officials expect a rate hike this year. Traders now put the probability of at least one rate hike by year-end at 84%, according to CME FedWatch data. A week ago, that probability stood at 57%. These concerns will be either confirmed or alleviated by the release of the Fed’s preferred inflation measure—the Personal Consumption Expenditures (PCE) index for May—which is set to be released next week.

Against this backdrop, risks are mounting for the stock market, which had been in a state of euphoria following SpaceX’s IPO, especially given the anticipated massive IPOs by Anthropic and OpenAI, according to CNBC. SpaceX shares, which debuted on the stock market with a surge, have been falling over the past two days and have lost about 20% from the intraday high reached on June 16.

Nevertheless, relief over the U.S.-Iran deal, as well as a statement by Apple CEO Tim Cook that gadget prices would inevitably rise due to higher memory costs, led to a semiconductor rally on Thursday. Shares of memory manufacturers Micron Technology, SanDisk, and Western Digital rose 5–11%. Intel’s stock jumped 9% thanks to President Donald Trump, who announced that the company would be developing chips in the U.S. in partnership with Apple. As a result, the iShares Semiconductor ETF gained 6.6% over the course of the day, reaching an all-time high. Since the beginning of the year, it has risen by nearly 110%.

— Following the Fed’s announcement, the risk of further monetary tightening is no longer a hypothetical scenario for the market, but a real threat that increases the likelihood of a recession and a stock market decline, according to Dennis DeBucher, chief market strategist at 22V Research, as quoted by CNBC. “We expect an extremely volatile market with no clear direction until there is more clarity regarding the dynamics of core PCE inflation,” he said.

— If the decline in energy prices is reflected in inflation statistics, Fed officials may ultimately have sufficient grounds to keep rates unchanged for an extended period rather than raise them, according to Forex.com market analyst Fawad Razakada. “I still believe that inflation should gradually slow in the coming months, and this could allow the Fed to maintain its current policy stance rather than move toward further tightening,” Bloomberg quotes the analyst as saying.

“The market may remain bullish thanks to the artificial intelligence trend, but at the same time, it could go through the entire summer with virtually no growth,” Reflexivity co-founder Giuseppe Sette told CNBC.

This article was AI-translated and verified by a human editor