Closing Recap

U.S. stocks finished mostly lower after a late-day fade erased earlier gains fueled by cooler CPI data, as geopolitical headlines spooked investors; oil surged on Middle East tensions, gold was little changed, and Treasury yields fell. 

Key Takeaways 

• Late Day Fade Hits Stocks: Major indices gave back initial advances driven by benign CPI data to finish mostly in the red, with the Dow flat and Nasdaq/S&P lower. 
• Cooler CPI Boosts Rate Cut Hopes: May CPI came in softer than expected (Headline M/M +0.1%, Core M/M +0.1%), initially sending futures higher and increasing bets for a September Fed rate cut. 
• Geopolitical Jitters Emerge: Afternoon headlines about potential U.S. embassy evacuations in Iraq and military dependent departures in Bahrain/Kuwait triggered a risk-off move. 
• Oil Surges on Middle East Tensions: Crude oil prices jumped nearly 5% on the geopolitical headlines and speculation about potential Israeli action against Iran. 
• Gold Flat After Volatility: Gold prices initially gained on CPI data and rate cut hopes but gave back most gains as geopolitical news also benefited oil. 
• Yields Fall on CPI & Flight to Safety: Treasury yields declined following the softer inflation print and as geopolitical concerns increased demand for government debt. 
• Sentiment Remains “Greed”: Despite some caution, the Fear & Greed Index held in Greed territory. 
• Budget Deficit Narrows: The May U.S. budget deficit shrank year-over-year due to a significant jump in customs receipts from tariffs. 

Market Overview 

U.S. equity markets experienced a volatile session, ultimately finishing mostly lower as an afternoon flare-up in geopolitical tensions overshadowed earlier optimism from cooler-than-expected inflation data. The day began on a positive note after the May Consumer Price Index (CPI) report showed inflation moderating more than anticipated, both on headline and core measures. This immediately boosted U.S. equity futures and increased market expectations for a Federal Reserve interest rate cut as early as September. Stocks moved to modest gains, with small caps initially outperforming and breadth favoring advancers. 

Index	Up/Down	% Change	Last
DJ Industrials	-1.1	0	42865
S&P 500	-16.57	-0.0027	6022
Nasdaq	-99.11	-0.005	19615
Russell 2000	-8.18	-0.0038	2164

However, the positive sentiment began to wane as the day progressed. In the afternoon, headlines emerged regarding potential U.S. embassy evacuations in Iraq and possible departures of military dependents from Bahrain and Kuwait. While unconfirmed and speculative regarding the cause (with some linking it to potential Israeli actions against Iran), these reports were enough to spook the market, triggering a sharp risk-off move. Stocks, which had been holding modest gains, quickly faded into negative territory. 

Oil prices surged on the news, while gold, which had already been up on the CPI data, held onto most of its gains. The late-day reversal highlighted the market’s sensitivity to geopolitical developments, even as domestic inflation data provided some encouragement. The focus now remains on upcoming economic data and any further clarification on the Middle East situation.

Economic Data

Yesterday’s key U.S. economic release was the May Consumer Price Index, which came in cooler than expected, supporting hopes for potential Fed rate cuts. The May budget deficit also narrowed. Consumer Price Index (CPI) (May): 

• Headline CPI M/M: +0.1% (Below +0.2% est., vs. +0.2% prior). 
• Headline CPI Y/Y: +2.4% (Below +2.5% est., vs. +2.3% prior). 
• Core CPI M/M (Ex-Food & Energy): +0.1% (Below +0.3% est., vs. +0.2% prior). 
• Core CPI Y/Y (Ex-Food & Energy): +2.8% (Below +2.9% est., vs. +2.8% prior). 
• Federal Budget (May): Deficit of $316 billion, down 9% YoY, as customs receipts nearly quadrupled to a record $23 billion due to tariffs. 

Commodities, Currencies, and Treasuries 

Gold futures, after gaining modestly overnight and extending gains on the benign CPI report, settled nearly unchanged on the day, up just $0.30 at $3,343.70 per ounce. Initial safe-haven demand was tempered by some profit-taking as trade de-escalation hopes lingered. Crude oil prices surged, with WTI futures climbing $3.17 (+4.88%) to settle at $68.15/bbl. The sharp rally was ignited by afternoon reports of potential U.S. embassy evacuations in the Middle East and speculation about possible Israeli action against Iran, which stoked geopolitical supply fears. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	3.17	USD/bbl	68.15
Brent	2.9	USD/bbl	69.77
Gold	0.3	USD/oz	3343.7
EUR/USD	0.0066	USD	1.1489
USD/JPY	-0.36	JPY	144.46
10-Year Note	-0.06	%	0.04414

Treasury yields fell across the curve following the softer-than-expected CPI data, increasing demand for U.S. government debt. The 10-year yield dropped about 6 basis points to 4.413%, marking its third consecutive daily decline. A 10-year Treasury auction saw decent but not overwhelming demand. The U.S. dollar index weakened as rate cut expectations firmed, with the Euro gaining against the dollar.

Looking Ahead 

The market will be highly sensitive to any further developments or clarifications regarding the geopolitical situation in the Middle East. Tomorrow brings the Producer Price Index (PPI) and weekly jobless claims, which will provide further insights into inflation and labor market conditions. While the CPI data was encouraging for doves, the Fed is expected to remain on hold at its meeting next week, with Chair Powell likely to reiterate a data-dependent approach amidst ongoing tariff uncertainties. Earnings season is winding down, but any remaining reports will be watched for corporate commentary on the economic outlook.