In a significant development in global affairs, U.S. stock futures experienced a sharp decline on Thursday night, following an airstrike by Israel on Iran. Futures linked to the Dow Jones Industrial Average plummeted by 677 points, equating to nearly 1.6%. Similarly, futures for the S&P 500 dropped by 1.7%, while the Nasdaq 100 futures saw a loss of 1.8%. This downturn was largely influenced by Israel's defense minister, Israel Katz, declaring a special state of emergency in response to the ongoing conflict.
As the situation escalated, two U.S. officials confirmed to NBC News that there was no involvement or assistance from the United States in this military action. The repercussions were felt in the oil markets as well, with Brent futures surging over 7% following the news, while West Texas Intermediate crude futures also rose by 7%. The stock market's reaction was immediate and pronounced.
In the regular trading session on Thursday, the 30-stock Dow and the Nasdaq Composite both managed to gain 0.2%. The broader S&P 500 index increased by nearly 0.4%, inching closer to its all-time high reached in February, now standing less than 2% away from that level. Contributing to this upward momentum was the May reading of the Producer Price Index, which showed a modest gain of 0.1% from the previous month – a figure that was below the expected 0.2% increase anticipated by economists surveyed by Dow Jones.
In addition to the positive economic indicators, easing bond yields boosted investor sentiment. Earlier in the week, the consumer inflation report for May also came in cooler than expected, further alleviating some concerns. However, investors remain cautious, particularly due to uncertainties surrounding the White House's tariff policy, which has been weighing on market gains.
Treasury Secretary Scott Bessent indicated on Wednesday that the Trump administration might be willing to extend the current 90-day tariff pause beyond the July 9 deadline, contingent on good faith negotiations with top trading partners. In contrast, President Donald Trump raised concerns about potential unilateral tariffs, stating, "We're dealing with Japan, we're dealing with South Korea. We're going to be sending letters out, in about a week and a half, two weeks, to countries, telling them what the deal is, like I did with the EU."
Despite the geopolitical tensions, stocks have shown solid performance this week, with the S&P 500 up nearly 0.8% and the Nasdaq Composite on track for a 0.7% advance. The Dow is also expected to see a 0.5% increase, marking a potential third consecutive week of positive gains for all three major indexes.
As investors brace for further developments, all eyes will be on the upcoming preliminary June reading of the University of Michigan's consumer sentiment report. This report could provide critical insights into consumer confidence and spending, which are vital components of the U.S. economy.
