Markets enter a shortened trading week on edge following last Friday’s geopolitical shock: Israeli strikes on Iran rattled risk sentiment and drove crude oil prices up 7%, their biggest jump since March 2022. The S&P 500 ended the week down 0.4%, as investors weighed rising tensions in the Middle East, soft inflation data, and growing uncertainty around monetary policy.
The Fed’s highly anticipated policy meeting this Wednesday anchors the week. While markets expect no rate change, investors will closely study the updated Summary of Economic Projections (SEP) and Chair Powell’s remarks for signals on whether two rate cuts remain likely this year. Meanwhile, U.S.-China trade negotiations remain fragile, and a 90-day tariff pause expires July 8—raising the stakes for global markets already on edge.
Traders will also focus on retail sales and housing data to gauge whether consumers and builders remain resilient amid policy and geopolitical headwinds.
Key Events This Week
Monday – June 16
- Empire State Manufacturing Survey (8:30 AM ET): Forecast: -6.0 (vs. -9.2 prior) — Manufacturing conditions remain weak in New York state.
Tuesday – June 17
- Retail Sales (8:30 AM ET): Forecast: -0.6% MoM (vs. +0.1% prior) — Consumer demand may be cooling more than expected.
- Retail Sales ex-Autos (8:30 AM ET): Forecast: +0.2% MoM — A modest gain suggests underlying resilience.
- Import Price Index (8:30 AM ET): Forecast: -0.2% MoM — Lower import costs could support inflation moderation.
- Industrial Production (9:15 AM ET): Forecast: -0.1% MoM — Output may have declined slightly in May.
- Capacity Utilization (9:15 AM ET): Forecast: 77.7% (unchanged) — Production remains below long-term norms.
- Business Inventories (10:00 AM ET): Forecast: 0.0% — Flat reading signals cautious restocking by firms.
- NAHB Housing Market Index (10:00 AM ET): Forecast: 36 (vs. 34 prior) — Builder sentiment remains subdued but stable.
Wednesday – June 18
- Housing Starts (8:30 AM ET): Forecast: 1.37 million — Continued builder activity supports housing supply.
- Building Permits (8:30 AM ET): Forecast: 1.44 million — Positive sign for future construction.
- Initial Jobless Claims (8:30 AM ET): Forecast: 250,000 — Labor market appears to be gradually softening.
- FOMC Rate Decision (2:00 PM ET): Fed expected to hold rates steady at 4.25–4.50%.
- Fed Chair Powell Press Conference (2:30 PM ET): Critical for clues on policy path, inflation outlook, and geopolitical risk assessment.
Thursday – June 19
- Markets Closed – Juneteenth Holiday
Friday – June 20
- Philadelphia Fed Manufacturing Survey (8:30 AM ET): Forecast: -1.0 (vs. -4.0 prior) — Conditions still weak, but improving.
- U.S. Leading Economic Indicators (10:00 AM ET): Forecast: -0.1% (vs. -1.0% prior) — Slower pace of decline could point to stabilization.
Market Insights
Crude’s 7% spike underscores the sensitivity of energy markets to Middle East instability. Traders are now pricing in an elevated geopolitical risk premium that may persist if tensions escalate further. With oil closing last week at its highest level in over two years, inflation expectations could become more volatile—complicating the Fed’s path forward.
While recent inflation data came in modestly below expectations (May CPI rose 2.4% YoY), it did little to change market expectations around rate cuts. However, the Fed’s new projections could reset expectations. In March, the FOMC penciled in two cuts this year. Whether those remain on the table amid sticky inflation and global uncertainty will shape the market’s next move.
Retail sales data on Tuesday will also be key, especially after signs that consumer momentum may be slipping. If spending proves more resilient than forecast, it could temporarily cool the market’s appetite for imminent rate relief.
Technical signals are mixed. CNN’s Fear & Greed Index shows fading momentum as the S&P 500 dipped below its 125-day moving average, hinting at growing investor caution. Still, with central banks, crude oil, and trade negotiations in play, sentiment remains fragile and headline-driven.
Bottom Line
This week presents a critical test for markets juggling soft economic data, intensifying geopolitical risks, and a potentially pivotal Fed decision. With equity and bond markets closed Thursday for Juneteenth, liquidity may thin out midweek—amplifying market reactions to any surprises from the Fed or foreign developments.
Whether the Fed maintains its dovish tilt in the face of rising global uncertainty—or signals a more hawkish pivot due to energy-driven inflation—will likely determine the market’s tone heading into the second half of June.
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