U.S. stock markets surged on Monday, bouncing back from last week’s losses as fears of an oil supply shock from Middle East tensions eased and attention turned toward the Federal Reserve’s upcoming policy meeting.
The Dow Jones Industrial Average climbed 439 points to 42,636.31, the S&P 500 gained 1.06% to hit 6,040.19, and the Nasdaq Composite rallied 1.35% to 19,668.63, supported by falling crude prices and renewed investor optimism.
Oil Prices Pull Back as Production Remains Intact
Last Friday, Wall Street fell sharply after oil prices spiked 7%, triggered by escalating military exchanges between Israel and Iran. However, the market rebounded Monday as the weekend’s airstrikes failed to disrupt oil production or exports, offering some relief to inflation-sensitive investors.
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Crude prices dropped over 3%, reversing Friday’s rally
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Oil benchmarks had previously hit their highest levels since January
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Investor sentiment improved after reports surfaced that Iran seeks to de-escalate tensions and resume nuclear talks, according to The Wall Street Journal
David Miller, CIO at Catalyst Funds, remarked:
“The strikes have continued, but it doesn’t seem like the oil markets and shipping lanes have been disrupted. Markets are just calming down a little bit from that big surprise on Friday.”
Focus Shifts to Federal Reserve Meeting
All eyes are now on the Federal Reserve’s interest rate decision scheduled for Wednesday, with Chair Jerome Powell’s remarks and updated economic projections expected to heavily influence market direction.
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The Fed is widely expected to hold rates steady
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Money markets are pricing in 46 basis points of rate cuts by end-2025
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There’s a 56% chance of a 25 bps rate cut in September, per CME FedWatch
Upcoming U.S. economic data this week includes:
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Monthly retail sales
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Import prices
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Weekly jobless claims
Investors are eagerly seeking clarity on whether a dovish pivot is coming amid signs of slowing inflation and softer consumer spending.
State Bank of Pakistan Holds Interest Rate at 11% Amid Global Uncertainty and Inflation Risks
Stock Movers and Market Reactions
Gainers:
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U.S. Steel jumped 5% after President Trump approved Nippon Steel’s $14.9 billion takeover bid
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Cisco climbed 1.8% after a Deutsche Bank upgrade to “buy”
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UPS and FedEx edged up after being named shipping partners for Trump Mobile, a new wireless carrier venture
Mixed Performance:
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T-Mobile US, AT&T, and Verizon initially dipped following the Trump Mobile launch but stabilized later in the session
Losers:
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Sarepta Therapeutics nosedived 46% following the disclosure of a second patient death linked to its gene therapy for muscular dystrophy
Market Breadth and Technical Metrics
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On the NYSE, advancing stocks outnumbered decliners by 4.36 to 1
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On the Nasdaq, the ratio stood at 2.7 to 1
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The S&P 500 recorded 11 new 52-week highs and 3 new lows
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The Nasdaq Composite posted 43 new highs and 67 new lows
Outlook: Rate Clarity and Oil Watch
As geopolitical fears subside—at least for now—the market’s next big test will be the Fed’s tone on inflation, employment, and future rate cuts. A cautious or hawkish stance could rekindle market volatility, especially if inflation expectations remain sticky.
With oil prices still a wildcard due to unresolved Middle East tensions, any renewed escalation could swiftly reverse the current optimism.
Investors should brace for heightened volatility this week as the Fed decision, inflation data, and global risk factors converge.
