Traders on the floor of the New York Stock Exchange experienced a notable surge in stock futures on Monday night, buoyed by a decline in oil prices and increasing optimism regarding a potential resolution to the ongoing U.S.-Iran conflict. Specifically, futures for the Dow Jones Industrial Average jumped by 441 points, representing a 0.9% increase, while S&P 500 futures also rose by 0.9%. Nasdaq-100 futures saw an even stronger performance, advancing by 1.2%. Notably, U.S. stock markets were closed on Monday in observance of the Memorial Day holiday.
President Donald Trump provided an optimistic update on the situation with Iran, stating that discussions aimed at ending the war were “proceeding nicely.” However, he also cautioned that the U.S. would be prepared to take a more aggressive stance should negotiations falter. This announcement contributed to a sharp decline in crude oil prices, with West Texas Intermediate futures falling by roughly 6%.
Last week proved to be a solid period for the stock market, with the S&P 500 climbing 0.9%, marking the index’s longest winning streak since late 2023. The Dow gained 2.1%, achieving its third weekly gain out of the last four, while the Nasdaq experienced a more modest rise of 0.5%, continuing a trend of gains with seven positive weeks out of the last eight.
Market analyst Adam Parker from Trivariate Research noted that there are fundamental factors driving the market rally. He pointed out that corporate earnings are projected to grow by 23% this year and by 16% the following year. Despite this growth, he remarked that the price-to-forward earnings ratio has been contracting somewhat, suggesting a complex market environment.
The decline in oil prices contributed positively to equity performance last week, with U.S. crude experiencing an 8.4% drop, marking its most significant weekly loss since mid-April. Nevertheless, crude oil prices remain elevated compared to earlier in the year. With inflationary pressures still present, investor expectations around the Federal Reserve’s monetary policy have moderated. Currently, traders are estimating an 8.5% probability of a rate hike in July, a notable increase from just 0.9% a month ago, as indicated by data from the CME Group’s FedWatch tool.
