Here is Schwab's early look at the markets for Monday, June 22.
Investors enter the week with a hawkish Federal Reserve meeting still fresh in mind, an interim U.S.-Iran deal pulling oil prices lower, and the market searching for its next major catalyst.
Today's earnings and economic calendar is relatively light, but the pace will pick up quickly throughout the week, with new data on business activity, housing, and inflation. The biggest test could come Thursday, when the latest Personal Consumption Expenditures, or PCE, price index could help determine whether the Fed's concerns about sticky inflation are justified.
Although the central bank held rates steady at its June meeting last Wednesday, leaving their target range between 3.5% and 3.75%, the policy signal turned more hawkish. The "dot plot"—which outlines policymakers' rate projections—showed half of Fed officials penciling in at least one rate hike this year, while inflation projections for 2026 and 2027 were lifted.
The brief 130-word Fed policy statement was widely viewed as hawkish as well, and Fed Chair Kevin Warsh highlighted the central bank's commitment to stabilizing consumer prices throughout his first press conference. The emphasis on Fed credibility in the fight against inflation, even at the risk of tighter financial conditions, led Treasury yields to spike and stocks to sell-off after the meeting on Wednesday.
However, chip stocks led a market rebound on Thursday, with the PHLX Semiconductor Index rising 6.4%. Looking at the bond market, more policy-sensitive short-term Treasury yields continued their climb, while longer-term yields mostly fell, flattening the yield curve.
Futures markets priced in a roughly 86% chance of at least one rate hike by year-end late last week after the Fed meeting, according to the CME FedWatch Tool.
"That chance seems a little bit too high for me, mainly because the outlook today is really very uncertain given everything that's going on in the Middle East," Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research said Thursday on the Washington Wise podcast. "We expect the Fed to be in wait-and-see mode. Our base case is that the Fed remains on an extended pause for now, holding its benchmark interest rate steady through the end of the year."
Thursday's equity market rebound came after the U.S. signed a 14-point interim Memorandum of Understanding, or MOU, to end ongoing hostilities with Iran and reopen the Strait of Hormuz. Oil prices fell 0.5% after the agreement, which came ahead of schedule.
However, investors should keep in mind that the full reopening of the Strait of Hormuz will likely take time. Mines need to be cleared; oil and fertilizer facilities need to ramp up production and make repairs; and the backlog of trapped ships could create a temporary bottleneck in the area.
Turning away from geopolitics, there are no major economic reports due today, but Tuesday will bring the June S&P Global Services Purchasing Manager's Index, or PMI, and the S&P Global Manufacturing PMI—offering a read into business activity across the country. The following day, investors will be watching May new home sales data, due at 10 a.m. ET. Stubbornly high mortgage rates and property prices led new home sales to sink 11.3% year-over-year in April. Another weak reading could suggest affordability challenges continue to sideline buyers.
May's PCE price index will then be in the spotlight on Thursday. After the hawkish shift from the Fed, investors will be watching closely to see whether the inflation data reinforces—or challenges—the central bank's outlook. Consensus forecasts a 4.1% year-over-year rise in headline PCE, according to Oxford Economics. That's up from 3.8% in April. Anything above that level could put further pressure on the Fed to lift rates this year.
Thursday will also feature the final revision to first quarter gross domestic product, or GDP, after the first estimate was lowered to 1.6% from 2% late last month. However, with consumers showing resilience in last week's stronger-than-expected retail sales report, markets may overlook anything short of a significant downgrade in this backward-looking measure.
The earnings calendar today is also light, but investors will likely be looking ahead to FedEx's earnings, due after the bell on Tuesday. Micron Technology's report will then be in focus on Thursday after market close. Shares of the memory maker have soared more than 800% over the past 12 months amid an AI-induced computer memory shortage that has boosted prices for their products. The company shattered Wall Street's forecasts in its last earnings report, with revenues and margins surging, but investor expectations will be even higher this time around with its valuation elevated.
As far as market movers Thursday, Intel shares spiked 10.6% after the company struck a deal with Apple to design and build chips domestically. Chipmakers, including Broadcom, Marvell, Nvidia, ARM Holdings, and Advanced Micro Devices, surged in the wake of the deal.
Memory makers also rose amid the momentum in the semiconductor space, with SanDisk and Micron Technology jumping 11.5% and 8.7%, respectively. Shares of cruise operators and airlines posted gains as well amid falling oil prices.
Meanwhile, Accenture stock plummeted 18% after the consulting giant agreed to acquire the asset intelligence company runZero and the software supply chain security company NetRise—as well as a majority stake in the cybersecurity platform Drago—for a combined $4.18 billion.
Overall, five out of 11 S&P 500 sectors ended Thursday in the green. Info tech led the charge due largely to the surge in semiconductor stocks, while healthcare and energy lagged the broader market as oil prices fell and investors took a risk-on approach.
Despite Thursday's market rebound, market breadth failed to rally after its sharp post-Fed meeting decline. Just 54.8% of S&P 500 stocks traded above their 50-day moving average, while 58.2% traded above their 200-day moving average.
Investor anxiety seemed to ease, however. After spiking to nearly 19 on Wednesday, the Cboe Volatility Index, or VIX, fell more than 10% to under 17 to end the shortened week of trading.
The Dow Jones Industrial Average® ($DJI) rose 72.15 points (+0.14%) Thursday to 51,564.70; the S&P 500 Index ($SPX) jumped 80.48 points (+1.09%) to 7,500.58, and the Nasdaq Composite® ($COMP) surged 496.28 points (+1.91%) to 26,517.93.
For the week, the Dow Jones Industrial Average rose 0.71%, the S&P 500 gained 0.93%, and the Nasdaq Composite added 2.43%.
