The S&P 500 experienced a notable increase on Monday, buoyed by investor expectations that the Iran-Israel conflict may de-escalate and eagerness for a more dovish approach from the Federal Reserve.

At the market’s close, the Dow Jones Industrial Average rose by 317 points (0.8%), the S&P 500 increased by 1%, and the NASDAQ Composite climbed 1.4%, led by advancements in technology stocks and reduced geopolitical uncertainties.

Ceasefire Optimism Returns, Oil Prices Decline

Initial positive sentiment stemmed from reports in The Wall Street Journal and Reuters suggesting that Iran has communicated with Middle Eastern intermediaries urging President Donald Trump to facilitate a ceasefire with Israel, although Tehran quickly denied these assertions.

Despite this denial, market optimism grew on hopes for de-escalation. Consequently, oil prices eased as the risk premium associated with supplies diminished, contributing to increased equity market confidence.

Focus Turns to Fed Decision and Future Guidance

Investor attention is set on the Federal Reserve’s two-day policy meeting starting Tuesday. While rates are expected to remain steady at about 4.5%, market participants are eager for indications of future rate cuts in response to decreasing inflation and soft economic indicators.

The Fed has already lowered rates by 100 basis points in 2024, and any change in voice could significantly influence asset pricing in the latter half of the year, especially with President Trump’s vocal advocacy for rate cuts amidst trade-related uncertainties.

G7 Dynamics and Manufacturing Data Ahead

Geopolitical issues are also unfolding at the G7 summit in Canada, where President Trump’s tariffs have created friction among allies. Canadian PM Mark Carney has indicated potential retaliation against U.S. measures if adjustments to steel and aluminum duties are not made.

Additionally, impending U.S. manufacturing data is expected to add to market volatility, contingent on domestic industrial performance.

Company Spotlight: Roku, US Steel, and Sarepta

Key corporate performances include:

• Roku soared following news of a significant partnership with Amazon Ads, focused on creating the largest authenticated CTV footprint in the U.S.

• United States Steel gained ground after President Trump approved its merger with Nippon Steel of Japan.

• Sarepta Therapeutics saw a decline after a report of a second patient death linked to its gene therapy Elevidys.

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