US Open: Wall Street Rebounds After US Iran Ceasefire

Following a nervous end to last week, optimism has returned to Wall Street. US equity indices are recovering part of their earlier losses, with capital flowing back into stocks. The main catalyst behind the improved sentiment was the announcement of a ceasefire between the United States and Iran. News that both sides had suspended military operations triggered an almost immediate sell off in the oil market, which investors interpreted as a sign of easing geopolitical risk.

The decline in oil prices quickly translated into stronger sentiment across US equities. Concerns about another wave of inflationary pressure have eased considerably, allowing markets to refocus on what is likely to be the key driver over the coming days, namely Federal Reserve policy and earnings from the largest technology companies. It appears that Wall Street has breathed a sigh of relief and returned its attention to the themes that have fuelled the bull market for months.

However, this is only the beginning of what promises to be a very demanding week. The Federal Reserve will conclude its policy meeting on Wednesday. The interest rate decision itself is unlikely to surprise markets, as investors overwhelmingly expect rates to remain unchanged. Far more important will be the accompanying statement and the press conference held by Fed Chair Kevin Warsh. In previous remarks, the new Fed Chair made it clear that he intends to move away from traditional forward guidance. As a result, markets will closely analyse every word from Kevin Warsh in an effort to assess the Fed's view on inflation, the strength of the US economy, and the likelihood of future interest rate changes.

At the same time, one of the most important phases of the earnings season is underway. Microsoft and Meta are scheduled to report on Wednesday, followed by Amazon and Apple on Thursday. Few sets of earnings reports carry greater significance, as these companies have been the primary drivers behind the recent rally in US equity indices.

Investors will once again focus on the performance of cloud computing businesses and artificial intelligence related operations. Markets want confirmation that strong growth continued through the second quarter and that massive AI investments are beginning to generate increasingly positive returns. Capital expenditure guidance will also attract considerable attention. Following Alphabet's earnings and its decision to increase this year's capital spending, investors now expect other technology giants to follow a similar path.

The coming days could therefore determine Wall Street's direction for the weeks ahead. On one hand, markets will assess signals coming from the Federal Reserve. On the other, investors will evaluate whether the largest technology companies can continue to justify their elevated valuations. Developments in the Persian Gulf also remain an important factor. Although the ceasefire has significantly improved sentiment and the influence of geopolitical developments on financial markets has gradually diminished, any renewed escalation could still increase market volatility, particularly in the oil market. At the same time, Wall Street appears to have adapted to operating in an environment of elevated geopolitical risk and is no longer reacting with the same level of anxiety seen just a few weeks ago. If the Fed maintains a measured tone, the largest technology companies once again deliver stronger than expected earnings, and tensions in the Middle East do not escalate, the current rebound could develop into a continuation of the broader upward trend.

Source: XTB Research

S&P 500 index futures (US500) are posting strong gains today, with improving sentiment on Wall Street directly linked to the suspension of military operations between the United States and Iran, as well as the sharp decline in oil prices. Reduced concerns over further escalation in the Middle East have encouraged investors to return to risk assets, shifting their focus back to economic fundamentals and the ongoing earnings season. The S&P 500 remains close to its record highs, and today's rebound demonstrates how quickly markets have taken advantage of improving geopolitical conditions to reverse earlier risk aversion.

Source: xStation5

Source: XTB Research

Company News

Broadcom (AVGO.US) shares are up more than 2%, supported by stronger sentiment across the semiconductor sector and reports of a strategic agreement with Samsung. The South Korean technology giant has signed a memorandum of understanding worth more than USD 200 billion, covering the supply of HBM memory used in Broadcom's next generation AI accelerators, as well as the production of advanced 2 nanometre chips.

D Wave Quantum (QBTS.US) shares are rising around 8% after the company announced an expanded partnership with AT&T. The US telecom operator plans to make broader use of D Wave's quantum computing technology to optimise its network and support AI driven autonomous systems. According to the company, the technology has already helped reduce customer service outages. The expanded cooperation with AT&T is another indication that the quantum computing industry is moving closer to meaningful commercial applications.

Applied Materials (AMAT.US) and Lam Research (LRCX.US) are also advancing after HSBC raised its price targets on both companies. Analysts pointed to strengthening demand for semiconductor manufacturing equipment, particularly as investment in AI infrastructure continues to accelerate.

Exxon Mobil (XOM.US) shares are down around 2%, tracking broad weakness across the energy sector following the sharp decline in oil prices. Crude has fallen after the United States and Iran suspended military operations, raising hopes for a diplomatic resolution and lower tensions in the Middle East. Additional pressure on oil prices comes from expectations that improving regional stability could allow unrestricted shipping through the Strait of Hormuz to resume.