June 17th, 2025
Market Performance:
U.S. stocks declined on Tuesday as optimism faded for a swift end to the Israel-Iran conflict. The market reacted sharply to escalating tensions after President Trump intensified his stance on Iran, demanding an “unconditional surrender.”
Posting on Truth Social, Trump warned, “The U.S. knows where the country’s leader is hiding,” adding, “He is an easy target, but is safe there — We are not going to take him out (kill!), at least not for now. But we don’t want missiles shot at civilians, or American soldiers. Our patience is wearing thin.” Following the President’s post, the Dow Jones Industrial Average (^DJI) fell around 0.6%, while the benchmark S&P 500 (^GSPC) dipped roughly 0.8%. The tech-heavy Nasdaq Composite (^IXIC) also pulled back around 0.8%.
Overseas, Asian markets ended mixed following the Bank of Japan’s decision to keep its policy rate steady at 0.5%, while European markets are trading mostly in the red.
Economic Takeaways:
- Oil prices jumped about 3% with Brent futures rising above $75 a barrel and West Texas Intermediate crude hovering just below $74.
- U.S. Treasury yields also dipped, and the DXY U.S. dollar index edged higher, signaling a modest flight to safety amid ongoing geopolitical tensions.
- The 10-year Treasury yield continued to rise, defying traditional patterns during geopolitical stress. Despite solid demand in Monday’s 20-year auction, investors may be looking past Middle East concerns and focusing instead on upcoming budget and trade deadlines set by President Trump.
- The Bank of Japan left its key interest rate unchanged at 0.5% but announced it would slow the pace of its monthly bond purchases, Bloomberg reported. The move is aimed at calming volatility in the bond market.
- Investors await the Atlanta Fed’s latest GDPNow estimate for Q2 growth. The prior reading was a robust 3.8%.
- On the economic front, headline retail sales for May came in below expectations, but the control-group measure—a key input for GDP—rose a solid 0.4%, in line with forecasts. Headline retail sales fell by 0.9% in May, below expectations for a 0.7% decline.
- Today marks the beginning of the FOMC’s June meeting, with an interest-rate decision and press conference with Fed Chair Jerome Powell scheduled for tomorrow afternoon.
- There’s a 14.5% chance of a July rate cut, and a 66% chance of one in September, according to the CME FedWatch Tool.
- The CBOE Volatility Index (VIX) jumped 5%, climbing back above 20 as tensions in the Middle East escalated. It had dipped below 19 at times on Monday, but the move suggests traders are bracing for increased market choppiness.
More Hope for a Soft Landing
Investor confidence in a “soft landing” for the global economy is gaining momentum, according to Bank of America’s June Global Fund Manager Survey. The poll revealed that 66% of respondents now expect inflation to fall to the Federal Reserve’s 2% target without triggering a recession—an 8-month high in soft landing expectations.
The renewed optimism marks a sharp turnaround from the peak of April’s tariff turmoil. Recession odds have dropped significantly in recent weeks, and fears of a tariff-fueled inflation surge have also eased among consumers.
“Investor sentiment is back to pre-Liberation Day ‘Goldilocks bull’ levels,” wrote Michael Hartnett, chief investment strategist at Bank of America Global Research.
Central Banks Eye More Gold, Less U.S. Dollar in Global Reserves
Central banks around the globe are ramping up gold (GC=F) purchases at a record pace while signaling a shift away from U.S. dollar reserves in the coming years.
A new survey by the World Gold Council found that “95% of central bank respondents expect global gold reserves to rise over the next 12 months.” Notably, a record “43% said they plan to increase their own holdings during that time.”
At the same time, “73% of central banks anticipate a moderate or significant decline in U.S. dollar holdings within global reserves over the next five years.” Many respondents also expect increased allocations to other currencies like the euro and renminbi over that same period.
The U.S. dollar index (DX-Y.NYB) is down 9% year-to-date, stirring concerns about its dominance amid rising geopolitical tensions and ongoing trade disputes. Growing unease about the U.S. fiscal outlook is also fueling interest in foreign assets, particularly in Europe and Asia, where stimulus expectations and valuations appear more attractive.
Gold, meanwhile, has repeatedly hit all-time highs this year—driven by strong central bank demand, rising inflows into gold-backed ETFs, and growing expectations that the Federal Reserve may soon begin cutting interest rates.
Notables
- Verve Therapeutics Soars on Eli Lilly Deal
Shares of Verve Therapeutics (VERV) surged 75% in pre-market trading after Eli Lilly (LLY) announced a potential acquisition valued at up to $1.3 billion. Despite the headline, Lilly shares slipped 0.8% early Tuesday. - Solar Stocks Slammed by Budget Bill
Solar names tumbled after CNBC reported the Senate’s version of the budget bill would retain provisions to reduce renewable energy incentives. First Solar (FSLR), Enphase Energy (ENPH), Sunrun (RUN), and SolarEdge Technologies (SEDG) each dropped between 15% and 30%. - T-Mobile Dips on SoftBank Share Sale
T-Mobile (TMUS) fell 4.5% pre-market after reports emerged that SoftBank offloaded a stake in the wireless provider. - Crypto Slips as Risk Sentiment Weakens
Bitcoin (/BTC) fell 2.8% Tuesday morning, extending recent volatility amid geopolitical uncertainty. Shares of crypto-exposed firms Coinbase (COIN) and MicroStrategy (MSTR) also slid about 2%. - Lennar Edges Higher After Mixed Earnings
Lennar (LEN) gained 1.8% pre-market, despite missing consensus EPS estimates in its latest report. The homebuilder topped revenue expectations and cited “softer market conditions,” with high mortgage rates and shaky consumer sentiment weighing on average sales prices. - AMD Extends AI Rally
Advanced Micro Devices (AMD) rose another 1% in early trading after surging nearly 9% Monday. The momentum follows AMD’s unveiling of new chips aimed at challenging Nvidia (NVDA) in the AI space. - Microsoft Slips on OpenAI Tensions
Microsoft (MSFT) dropped nearly 1% pre-market following a Wall Street Journal report suggesting tensions with OpenAI are “reaching a boiling point.”
What’s Ahead
U.S. markets face a shortened trading week due to the Juneteenth holiday on Thursday, shifting the release of weekly jobless claims to Wednesday. Initial claims have ticked up over the past three weeks, climbing to around 250,000 from their earlier range of 220,000–230,000. While still early, this potential cooling in the labor market is likely on the Fed’s radar.
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