The S&P 500 Index ($SPX) (SPY) is down -0.88%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.06%.  June E-mini S&P futures (ESM25) are down -0.71%, and June E-mini Nasdaq futures (NQM25) are down -0.79%. 

Stock indexes are trading lower after Israel last night launched a series of military attacks on Iranian nuclear and ballistic missile programs and also killed some top Iranian military commanders and nuclear scientists. Israel struck some 100 targets in Iran and Iran responded with a drone attack on Israel. 

Israeli Prime Minister Netanyahu said that the strikes “will continue for as many days as it takes to remove this threat.”  President Trump said Iran needs to make a nuclear deal with the US “before it is too late” and the next round of attacks will be “even more brutal.” US-Iranian nuclear talks are scheduled for Sunday but it is unclear whether those talks will proceed.

The Trump administration said the US was “not involved” in the military strikes.  However, the US might be drawn directly into the Israeli-Iranian conflict if Iran tries to block the Strait of Hormuz or Iran attacks US assets in the region (directly or through proxies).  The US might also aid Israel if Iran responds with widespread attacks on Israeli civilians. The markets are also worried about the disruption to the global economy from an upward spike in oil prices.

Oil prices rallied as much as +13% on the initial news of the strikes but then fell back and are currently up more than +7%.  Gold prices are up +1.7%.

Investors are cautious ahead of this weekend’s G-7 meeting in a resort town near Banff due to the possibility of fresh trade or tariff developments as President Trump meets with his counterparts.  Investors are also bracing for negative tariff news over the next few weeks after President Trump late Wednesday said he intends to send letters to dozens of US trading partners in the next one to two weeks setting unilateral tariffs, ahead of the July 9 deadline that came with his 90-day pause. 

Today’s preliminary June University of Michigan US consumer sentiment index rose +8.3 points to 60.5, stronger than expectations for a rise to 53.6.  In another favorable development, 1-year inflation expectations fell to +5.1% from +6.6% in May, which was a larger decline than expectations of a decline to +6.4%.  The 5-10 year inflation expectations indicator fell slightly to +4.1% from +4.2% in May, in line with market expectations.

The markets are discounting the chances at 3% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

Overseas stock markets today are lower.  The Euro Stoxx 50 is down -1.44%.  China’s Shanghai Composite closed down -0.75%.  Japan’s Nikkei Stock 225 closed down -0.89%.

Interest Rates

September 10-year T-notes (ZNU25) today are down -7 ticks.  The 10-year T-note yield is up +2.6 bp at 4.385%.  T-note prices normally should have rallied on safe-haven demand from the Israeli military strikes on Iran, but T-note prices are instead trading lower on the inflationary implications of today’s +7% rally in oil prices.  The 10-year breakeven inflation expectations rate is up +2.0 bp at 2.289%, rebounding higher from an early 5-week low.

European government bond yields are slightly higher.  The 10-year German bund yield is up +1.5 bp to 2.493%. The 10-year UK gilt yield is up +4.0 bp to 4.517%.

Swaps are discounting the chances at 12% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Israel’s military attack on Iran has produced a rally in oil-company and defense stocks while travel stocks are falling.  Exxon (XOM) is up about +2%, and Chevron (CVX) is up about +1%.  Defense contractors are trading higher.  Lockheed Martin (LMT) is up +3.4%, Northrop Grumman (NOC) is up +2.6%, and RTX Corp (RTX) is up +2.4%.

Travel stocks are under pressure today as tourism will be undercut if there is an extended war in the Middle East.   Booking Holdings (BKNG), Expedia Group (EXPE), Hilton Worldwide Holdings (HLT), and Marriot International (MAR) are showing losses of about -2%.

Airlines are taking a hit as higher oil prices mean increased fuel costs and reduced profits.  Airline stocks were already on weak ground after US inflation news on Thursday showed airfares in May fell -2.7% m/m, the fourth straight month-over-month decline, the longest skid in nearly a year.   American Airlines Group (AAL) and United Airlines Holdings (UAL) are both down about -4%. Delta Air Lines (DAL) is down -3.4%, and Southwest Airlines (LUV) is down -1.5%.

Visa (V) and Mastercard (MA) are down more than -4% on today’s Wall Street Journal report that large retailers, such as Amazon and Walmart, are investigating how to use or issue stablecoins to bypass credit card fees.

US Steel (X) is down more than -3% after Nikkei reported that Nippon Steel’s planned takeover of US Steel may be halted if Nippon does not have sufficient freedom of management.

Adobe (ADBE) is down more than -6% after Q2 results beat expectations but were insufficient to alleviate concerns that AI will take a big bite out of Adobe’s revenues.

McDonald’s (MCD) is little changed after Argus Research downgraded the stock to hold from buy.

Earnings Reports (6/13/2025)

B Riley Financial Inc (RILY), Compass Diversified Holdings (CODI), Golden Matrix Group Inc (GMGI), Outdoor Holding Co (POWW), Roadzen Inc (RDZN), Seneca Foods Corp (SENEB).