Wall Street opened the week with a bang. The Nasdaq surged 3.07% Monday, its best day since 31 March, after the US and Iran agreed to halt the conflict and reopen the Strait of Hormuz.
The S&P 500 rose 1.65% and the Dow added 0.92%. Oil cratered nearly 5%, with WTI briefly breaking below $80 a barrel for the first time since March.
But the euphoria is about to be tested. Tonight the Fed begins its two-day meeting, the first under new chair Kevin Warsh, and markets are holding their breath ahead of tomorrow's rate decision.
The Fed announces its rate decision tomorrow, 17 June, in its first meeting under chair Kevin Warsh. Roughly 97% of traders expect rates held in the 3.5% to 3.75% range. The bigger story is the tone. Markets are watching for a shift from an easing bias to a neutral stance, and that is what could steer tech names like Nvidia (NVDA) tonight.
The US-Iran peace signing
The final US-Iran agreement is set to be signed Friday in Switzerland. Monday's rally already priced in most of the good news. The focus now shifts to whether momentum can hold once the headline fades.
The oil reset
Reopening the Strait of Hormuz pushed crude sharply lower. That is a drag for producers like Exxon (XOM) and Chevron (CVX), whose revenue outlook shrinks. On the flip side, it is good news for airlines like Delta (DAL) and consumers sensitive to energy costs.
US futures drifted flat-to-slightly-lower Tuesday morning after Monday's surge. Investors are holding off on big positions until the Fed decision lands. Tech remains the main driver, while energy names search for a new equilibrium.
Macro Note 📝
The macro setup has shifted from geopolitical fear to relief mode. The US-Iran truce pushed oil sharply lower, easing inflation pressure and helping risk sentiment.
But the next test is the Fed. If Warsh sounds more hawkish than expected, yields could rise again and cool the tech rally.
Tonight is no longer really about the US-Iran truce. It is about the Fed. The tech rally has room to extend if Warsh holds rates as expected. But a more hawkish tone could cool the euphoria fast.
If you hold tech or energy names, tonight is a direction test. Check your watchlist positions before the Fed decision drops.
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