Stocks Settle Sharply Higher as Middle East Tensions Ease

The S&P 500 Index ($SPX) (SPY) on Monday closed up +1.48%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +1.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.78%.  September E-mini S&P futures (ESU26) rose +1.49%, and September E-mini Nasdaq futures (NQU26) rose +1.77%.

Stock indices settled sharply higher on Monday, with the S&P 500 posting a 2-month high, the Dow Jones Industrials posting a 3.5-week high, and the Nasdaq 100 posting a 1.5-week high.  Stocks rallied on Monday as the latest signs of easing tensions in the Middle East pushed crude oil prices sharply lower and allayed fears about faster inflation.  The slump in crude oil also knocked bond yields lower and supported stocks.  The 10-year T-note yield fell -5 bp to 4.68%. 

Stocks extended their gains on Monday amid signs of strength in the US economy after the July ISM manufacturing index rose by +2.3 to 55.6, stronger than expectations of 53.9 and the fastest pace of expansion in four years.

On the negative side, US June construction spending unexpectedly fell -0.1% m/m, weaker than expectations of a +0.2% m/m increase.

Dovish comments on Monday from New York Fed President John Williams were supportive for stocks and bonds, as he said interest rates remain well positioned and inflation should ease during the second half of the year.

Sep WTI crude oil prices (CLU26) fell more than 5% on Monday, hoping the Strait of Hormuz could soon be reopened as geopolitical tensions ease.  President Trump called off a planned attack on Iran, and Iran suggested negotiations to get more ships moving through the Strait of Hormuz were making progress. Saudi Arabia's Crown Prince Mohammed bin Salman held a call with President Trump over the weekend and "stressed the need to prioritize dialogue to reduce escalation and the importance of making every possible effort to achieve calm."

The outlook for strong Q2 earnings is a bullish factor for stocks. Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%, which was more than double the +12% analysts had expected. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 86% of the 311 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 66% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled mixed on Monday.  The Euro Stoxx 50 rallied to a new all-time high and closed up +1.08%.  China's Shanghai Composite closed down -0.59%.  Japan's Nikkei-225 Stock Average closed down -0.94%.

Interest Rates

September 10-year T-notes (ZNU6) on Monday closed up +13.5 ticks.  The 10-year T-note yield fell -5.1 bp to 4.684%.  Sep T-notes moved higher amid Monday’s slump of more than -5% in WTI crude oil prices, suppressing inflation expectations.  T-notes also gained support on Monday after the US Treasury said it will allow Japan to use the Foreign and International Monetary Authorities Repo Facility, which will allow the BOJ to use its Treasury holdings as collateral to access dollars, rather than sell the bonds on the open market to raise cash for yen intervention.

European government bond yields moved lower on Monday.  The 10-year German bund yield fell -5.4 bp to 3.152%.  The 10-year UK gilt yield fell -9.7 bp to 4.953%.

The Eurozone July S&P manufacturing PMI was revised downward by -0.1 to 51.9 from the originally reported 52.0. 

German June retail sales fell -1.1% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 13 months.

The markets are discounting an 88% chance of a +25 bp ECB rate hike at their next policy meeting on September 10.

US Stock Movers

The Magnificent Seven stocks, sans Apple, rallied on Monday, a bullish factor for the broader market. Meta Platforms (META) closed up more than +6%, and Amazon.com (AMZN), Microsoft (MSFT) and Alphabet (GOOGL) closed up more than +4%.  Also, Tesla (TSLA) closed up more than +3%, and Nvidia (NVDA) closed up more than +2%.

Airline stocks and cruise line operators moved higher with Monday’s -5% plunge in crude oil prices.  Norwegian Cruise Line Holdings (NCLH) closed up more than +6%, and American Airlines Group (AAL), United Airlines Holdings (UAL), and Alaska Air Group (ALK) closed up more than +5%.  Also, Delta Air Lines (DAL) and Southwest Airlines (LUV) closed up more than +4%, and Carnival (CCL) closed up more than +3%.  In addition, Royal Caribbean Cruises (RCL) closed up more than +1%.

Software stocks rose on Monday to provide support to the overall market.  Oracle (ORCL) closed up more than +9%, and ServiceNow (NOW), Thomson Reuters (TRI), and Workday (WDAY) closed up more than +3%.  Also, Atlassian Corp (TEAM), Datadog (DDOG), and Palantir Technologies (PLTR) closed up more than +2%, and Salesforce (CRM) closed up more than +1%. 

Energy stocks and service providers were under pressure on Monday after WTI crude oil tumbled more than -5%. Diamondback Energy (FANG), Occidental Petroleum (OXY), Phillips 66 (PSX), and Marathon Petroleum (MPC) closed down more than -2%.  Also, APA Corp (APA), Chevron (CVX), ConocoPhillips (COP), Devon Energy (DVN), Haliburton (HAL), and Valero Energy (VLO) closed down more than -1%.

Atkore (ATKR) closed up more than +28% after Prysmian agreed to acquire the company for $3.8 billion, or about $95 a share. 

Boeing (BA) closed up more than +8% to lead gainers in the Dow Jones Industrials after BNP Paribas double-upgraded the stock to outperform from underperform.

Ferguson Enterprises (FERG) closed up more than +6% after S&P Dow Jones Indices announced the stock will replace Electronic Arts in the S&P 500 before the opening of trading on Wednesday, August 5. 

Corning (GLW) closed up more than +6% after Truist Securities upgraded the stock to buy from hold with a price target of $175.

CNH Industrial (CNH) closed up more than +5% after boosting its full-year adjusted EPS forecast to 41 cents to 46 cents from a previous forecast of 35 cents to 45 cents, above the consensus of 41 cents. 

Supernus Pharmaceuticals (SUPN) closed up more than +3% after agreeing to combine with Indivior Pharmaceuticals in a tax-free all-stock merger of equals. 

GameStop (GME) closed down more than -12% after announcing plans to exchange about $1.4 billion in outstanding convertible senior notes for shares of its common stock with certain existing shareholders.

Krystal Biotech (KRYS) closed down more than -8% after reporting Q2 net product revenues of $119.2 million, weaker than the consensus of $122.3 million.

Marriott International (MAR) closed down more than -6% to lead losers in the S&P 500 after reporting Q2 revenue of $7.07 billion, weaker than the consensus of $7.22 billion.

Fair Isaac (FICO) closed down more than -6% after Wolfe Research downgraded the stock to peer perform from outperform. 

eBay (EBAY) closed down more than -5% after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $92.

Circle Internet Group (CRCL) closed down more than -3% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $38. 

Earnings Reports (8/4/2026)

Advanced Micro Devices Inc (AMD), AMETEK Inc (AME), Amgen Inc (AMGN), Apollo Global Management Inc (APO), Aptiv PLC (APTV), Archer-Daniels-Midland Co (ADM), Arista Networks Inc (ANET), Assurant Inc (AIZ), Ball Corp (BALL), Booking Holdings Inc (BKNG), Broadridge Financial Solutions (BR), Caterpillar Inc (CAT), Cummins Inc (CMI), DaVita Inc (DVA), Devon Energy Corp (DVN), Duke Energy Corp (DUK), DuPont de Nemours Inc (DD), Emerson Electric Co (EMR), EOG Resources Inc (EOG), Expeditors International of Washingtom (EXPD), Fidelity National Information (FIS), Gartner Inc (IT), Gilead Sciences Inc (GILD), Healthpeak Properties Inc (DOC), Henry Schein Inc (HSIC), IDEXX Laboratories Inc (IDXX), International Flavors & Fragrances (IFF), Jacobs Solutions Inc (J), Kimberly-Clark Corp (KMB), Kimco Realty Corp (KIM), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), McDonald's Corp (MCD), Merck & Co Inc (MRK), Mosaic Co/The (MOS), NRG Energy Inc (NRG), Paramount Skydance Corp (PSKY), Pfizer Inc (PFE), Pinnacle West Capital Corp (PNW), Prudential Financial Inc (PRU), Public Service Enterprise Group (PEG), Qnity Electronics Inc (Q), Revvity Inc (RVTY), Rockwell Automation Inc (ROK), Sysco Corp (SYY), TransDigm Group Inc (TDG), Waters Corp (WAT), WW Grainger Inc (GWW), Wynn Resorts Ltd (WYNN), Zebra Technologies Corp (ZBRA).