Markets Surge as Ceasefire Bolsters Rally — But Risks Are Far From Over

U.S. Markets Daily Update – Tuesday, June 24, 2025

Market Performance Snapshot

• S&P 500 advanced ~1.1%, closing within 1% of its February all-time high.

• Nasdaq Composite surged ~1.4%, with the Nasdaq 100 hitting a fresh 4‌-month record.

• Dow Jones rallied ~1.2% or +500 points.

Major Market Drivers

1. Geopolitical De-escalation
   President Trump announced a "complete and total ceasefire" between Israel and Iran, easing Middle East tensions. Analysts warn the downside risk isn’t gone: Morgan Stanley’s bearish scenario flags a ~75% YoY oil surge to $120+/bbl if the Strait of Hormuz is disrupted.

2. Oil & Commodities
   WTI dropped ~6% to $64.37/barrel, Brent fell to ~$67, marking the steepest daily drop in four sessions. Lower energy prices helped relieve inflation expectations.

3. Federal Reserve Tone
   Powell’s House testimony reinforced a “wait and see” tone regarding rate cuts; money markets are still pricing in two cuts by year-end—the first perhaps in September. However, some Fed officials have reversed earlier dovish views amid inflation concerns.

4. Fixed Income & Volatility
   — The 10‌‑year yield slid to ~4.29%, nearing the lowest point since early May.
   — The VIX tumbled ~12%, dropping to pre-conflict levels, signaling reduced fear in the market.

5. Earnings & Sector Moves
   — Tech names benefited: Nvidia and Broadcom logged strong gains after upgrades.
   — Coinbase spiked ~12% as Bitcoin climbed over $105k.
   — Travel & consumer stocks were lifted by the geopolitical windfall.
   — Energy stocks lagged amid oil weakness.

Deeper Insights & Historical Context

• Resilience after shocks: HSBC notes that despite geopolitical flare-ups and slower global growth, U.S. equities often rebound post-crisis—citing recent rallies backed by strong consumer spending, AI tailwinds, and undervalued positioning.

• Risk remains in macro policy: BofA warns the economy may crack this summer if labor markets weaken or tariff impacts deepen; then, the Fed could execute aggressive cuts—possibly 75 bps starting September.

• Bearish undercurrent: BCA Research projects a 25% decline if a recession materializes, citing warning signs like rising delinquencies, resumed student loan payments, and housing stresses.

• Stagflation fears persist: Despite calm sentiment, structural inflation risks from tariffs and fiscal stimulus remain. Powell downgraded U.S. growth forecasts to ~1.4% and inflation at ~3.1%—raising stakes for persistent stagflation.

Upcoming Key Events

June 24 (Today): Fed Chair Powell Testifies

Fed Chair Powell will testify before the House. Pay close attention to any hawkish or dovish signals as they may influence market sentiment.

June 26: Core PCE Inflation Release

The May Core PCE, the Federal Reserve's preferred measure of inflation, will be released. This data is crucial for assessing the inflation outlook and potential Fed policy adjustments.

June 26 (Post-Close): FedEx Q4 Earnings

FedEx, a key transportation indicator, will announce its Q4 earnings. Watch closely for any guidance updates as they could signal broader economic trends.

Ongoing: Tariff and Trade Policy Updates

Stay alert for developments in tariff-related court rulings, including WTO decisions on steel and tractor tariffs. These updates may introduce additional policy uncertainty.

Q2 Earnings Season: Tech & Consumer Highlights

The Q2 earnings season is kicking off, with a focus on tech and consumer sectors. Expectations are being recalibrated in light of recent tariffs and geopolitical conflicts.

Strategic Themes & Scenario Planning

1. Equity Pulse:

   • Base case: Continued rally fueled by improved sentiment, stable Fed, and supportive earnings—though gains may moderate near all-time highs.

   • Bull case: Sustained peace in the Middle East + Fed pivot + strong tech earnings pushes S&P toward ~6,500 by December.

   • Bear case: Tariffs, recession signals, or renewed conflict burst risk premia—falling into a 20–25% correction.

2. Inflation & Fed Watch:

   • Oil slump supports cooler inflation, but trade/tariff-related price pressures loom. Powell’s next moves will be data-dependent—core PCE and labor market readings will matter most.

3. Commodities & FX:

   • Oil downshift lowers CPI risk, but a flare-up in the Straits could reverse quickly.

   • Dollar weakness continued—euro testing $1.1640—a tailwind for multinationals.

4. Volatility & Yield Signals:

   • VIX’s drop shows complacency—yet volatility could surge if economic surprises or geopolitical shocks emerge.

   • Yield curves flattening (~10yr at ~4.3%) reflect growing concern about future growth.

Disclaimer: This content is educational and not investment advice.