By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
Despite a geopolitical relief rally, panelists express concern about slowing growth, sticky inflation, and overreliance on tech earnings. They agree that the market's disconnect from macro reality could lead to a rapid repricing if Q2 data confirms Q1 weakness.
Risk: The market's overreliance on tech earnings and a slowing economy with sticky inflation, which could lead to a rapid repricing if Q2 data confirms Q1 weakness.
Opportunity: None explicitly stated.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.58%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.84%. June E-mini S&P futures (ESM26) rose +0.59%, and June E-mini Nasdaq futures (NQM26) rose +0.88%.
Stock indexes recovered from early losses on Thursday and settled higher, with the S&P 500 and Nasdaq 100 climbing to new all-time highs. Stocks rebounded after Axios reported that the US and Iran reached a deal to extend the ceasefire for sixty days and for negotiations to start on Iran's nuclear program, with President Trump still needing to approve the terms. The memorandum of understanding would state that shipping through the Strait of Hormuz would be "unrestricted," with Iran required to remove all mines from the strait within 30 days. Crude oil prices gave up a +3% advance on the news.
Stocks initially moved lower on Thursday after fresh US attacks on Iran boosted crude oil prices and fueled doubt over whether an end to the war is imminent. The US struck Iranian military targets for the second time this week, and Kuwait said it responded to Iranian missile and drone threats.
Stocks also found support on Thursday amid Fed-friendly US economic news. The Apr core PCE price index, the Fed's preferred inflation gauge, rose as expected. Also, April capital goods new orders unexpectedly declined, weekly jobless claims rose more than expected, and Q1 GDP was revised downward. In addition, Apr new home sales fell more than expected. The 10-year T-note yield gave up an early advance and is down -2 bp to 4.46%.
US weekly initial unemployment claims rose by +5,000 to 215,000, showing a weaker labor market than expectations of 211,000.
US Apr personal spending rose +0.5% m/m, right on expectations. Apr personal income was unchanged m/m, weaker than expectations of +0.4% m/m.
The US Apr core PCE price index, the Fed's preferred inflation gauge, rose +3.3% y/y, right on expectations and the largest increase in 2.5 years.
US Apr capital goods new orders nondefense ex-aircraft and parts unexpectedly fell -1.1% m/m versus expectations of a +0.4% m/m increase and the biggest decline in a year.
US Q1 GDP was revised downward to +1.6% (q/q annualized), weaker than expectations of no change at +2.0%. Q1 personal consumption was revised lower to +1.4% from the previously reported +1.6%, and the Q1 core PCE price index was revised upward to a 3-year high of +4.4% from the previously reported +4.3%.
US Apr new home sales fell -6.2% m/m to 622,000, weaker than expectations of 660,000.
Hawkish Fed comments were negative for stocks and bonds. Fed Governor Lisa Cook said inflation is headed in the wrong direction and she would be prepared to raise interest rates if that persists. Also, Minneapolis Fed President Neel Kashkari said US consumer prices are still "much too high" and that bringing down inflation remains his top priority. In addition, St. Louis Fed President Alberto Musalem said inflation is meaningfully above target, expectations are rising, and the Fed should respond to higher real rates by hiking policy.
Crude oil prices gave up a +3% advance on Thursday and finished only slightly higher after Axios reported that the US and Iran have reached a preliminary agreement to extend the ceasefire for 60 days and begin negotiations on Iran’s nuclear program. Crude prices initially jumped on Thursday after US forces shot down four Iranian drones fired at a commercial ship and hit a launch site near the Strait of Hormuz. Also, the US Treasury added Iran's Persian Gulf Strait Authority to its Iran-related sanctions list to prevent Iran from profiting from vessels transiting the Strait of Hormuz by charging tolls. In addition, Israel stepped up attacks on Lebanon and said its ground forces would move further into the country, potentially complicating US-Iran talks on an interim peace deal.
The markets are discounting a 0% chance of a -25 bp FOMC rate cut at the next FOMC meeting on June 16-17.
The generally favorable Q1 earnings season is winding down. As of Thursday, 83% of the 482 S&P 500 companies that reported Q1 earnings have beaten estimates. Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence. Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.
Overseas stock markets settled mixed on Thursday. The Euro Stoxx 50 closed down -0.25%. China's Shanghai Composite recovered from a 5-week low and closed up +0.12%. Japan's Nikkei Stock Average closed down -0.47%.
Interest Rates
June 10-year T-notes (ZNM6) on Thursday closed up +4.5 ticks. The 10-year T-note yield fell -2.8 bp to 4.455%. Jun T-note prices recovered from early losses and climbed to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 4.432%. T-notes moved higher Thursday on Fed-friendly economic news. Weekly jobless claims rose more than expected, Apr core capital goods orders unexpectedly declined, Q1 GDP was revised lower, and the Apr core PCE price index, the Fed's preferred inflation gauge, rose as expected. Also, Apr new home sales fell more than expected. T-notes maintained their gains on solid demand for the Treasury’s $44 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.52, better than the 10-auction average of 2.50.
T-notes initially moved lower on Thursday after WTI crude oil prices rose more than +3%, which raised inflation expectations. Also, hawkish comments from Fed Governor Lisa Cook, St. Louis Fed President Alberto Musalem, and Minneapolis Fed President Neel Kashkari undercut T-note prices, as they expressed concern about persistently high inflation.
European government bond yields moved lower on Thursday. The 10-year German Bund yield fell -2.5 bp to 2.962%. The 10-year UK gilt yield fell to a 5-week low of 4.791% and finished down -4.4 bp to 4.814%.
The Eurozone May economic sentiment indicator rose +0.3 to 93.5, stronger than expectations of no change at 93.0.
ECB Chief Economist Philip Lane said the impact of the Iran war will take longer to show in the labor market, and the "second round" of the energy shock on the Eurozone will persist for a while.
Swaps are discounting an 89% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.
US Stock Movers
Chipmakers and AI-infrastructure stocks rallied on Thursday to lead the broader market higher. ARM Holdings Plc (ARM) closed up more than +11%, and Advanced Micro Devices (AMD) and Qualcomm (QCOM) closed up more than +4%. Also, Sandisk (SNDK) and Marvell Technology (MRVL) closed up more than +3%, and Seagate Technology Holdings Plc (STX) and Broadcom (AVGO) closed up more than +1%.
Drone-related stocks surged on Thursday after the Wall Street Journal reported the Trump administration is exploring funding deals with a group of drone companies. Unusual Machines (UMAC) closed up more than +59%, and Red Cat (RCAT) closed up more than +34%. Also, AIRO Group Holdings (AIRO) closed up more than +21%, and AeroVironment (AVAV) and Kratos Defense & Security Solutions (KTOS) closed up more than +14%.
Snowflake (SNOW) closed up more than +36% after reporting Q1 revenue of $1.39 billion, better than the consensus of $1.33 billion and raising its 2027 product revenue forecast to $5.84 billion from a previous estimate of $5.66 billion, well above the consensus of $5.68 billion.
Dollar Tree (DLTR) closed up more than +17% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $1.74, stronger than the consensus of $1.55, and raising its 2027 adjusted EPS estimate to $6.70 to $7.10 from a previous estimate of $6.50 to $6.90, above the consensus of $6.69.
Agilent (A) closed up more than +16% after raising its full-year revenue forecast to $7.39 billion-$7.49 billion from a previous estimate of $7.3 billion-$7.5 billion yuan, above the consensus of $7.39 billion.
Best Buy (BBY) closed up more than +15% after forecasting Q2 comparable sales up +1.00%, stronger than the consensus of down -0.32%.
Hormel Foods (HRL) closed up more than +12% after reporting Q2 adjusted operating margin of 9.9%, stronger than the consensus of 8.9%.
Heico (HEI) closed up more than +11% after reporting Q2 net sales of $1.38 billion, well above the consensus of $1.25 billion.
Cargurus Inc (CARG) closed up more than +4% after Barclays initiated coverage on the stock with a recommendation of overweight and a price target of $35.
Photronics (PLAB) closed down more than -36% after forecasting Q3 adjusted EPS of 39 cents to 45 cents, weaker than the consensus of 54 cents.
Symbotic (SYM) closed down more than -9% after Softbank Group is said to sell 5.6 million shares of its holdings of SYM in an unregistered block trade between $51 and $53.63 a share.
Tyson Foods (TSN) closed down more than -6% after announcing that CEO King will step down after five years.
Trade Desk (TTD) closed down more than 5% after Rothschild & Co Redburn reinstated coverage of the stock with a sell recommendation and a price target of $11.
HP Inc. (HPQ) closed down more than -2% after lowering the upper end of its full-year EPS estimate to $2.90-$3.10 from a previous view of $2.90-$3.20, citing rising memory and storage costs.
Earnings Reports(5/29/2026)
American Woodmark Corp (AMWD), Atlantic International Corp (ATLN), Buckle Inc/The (BKE), Critical Metals Corp (CRML), Genesco Inc (GCO), Liberty Live Holdings Inc (LLYVA), Navan Inc (NAVN), Pioneer Bancorp Inc/NY (PBFS), Richtech Robotics Inc (RR), Whitestone REIT (WSR).
Four leading AI models discuss this article
"The rally rests on a preliminary deal that requires Trump sign-off amid ongoing military action and shows no relief from hawkish Fed rhetoric or sticky 3.3% core PCE."
Markets rallied to records on unconfirmed US-Iran truce reports that reversed oil's +3% spike and eased Strait of Hormuz risk. Yet the article underplays that the deal still needs Trump approval, follows fresh US strikes, and coincides with Israel's Lebanon escalation. Weak Q1 GDP at +1.6%, rising jobless claims, and core PCE at a 2.5-year high of +3.3% y/y arrived alongside three hawkish Fed speakers. Markets price zero chance of a June cut. Tech and AI names led gains while broader earnings growth ex-tech is only +3%. The truce may prove fleeting if negotiations stall.
Soft data plus lower oil could still ease financial conditions enough to extend the multiple re-rating even without a June cut.
"The market is ignoring that core PCE is accelerating to a 2.5-year high while betting the Fed will cut—a bet that only works if the geopolitical truce holds AND growth doesn't surprise further to the downside."
The headline screams 'geopolitical relief rally,' but the real story is buried: this market is pricing in a Fed pause on deteriorating fundamentals. Q1 GDP revised down to 1.6%, core PCE at 3.3% y/y (largest in 2.5 years), jobless claims rising, capex orders down 1.1% m/m. Three Fed officials just signaled hawkishness. The Iran truce is noise—oil gave back all gains. What's actually driving SPX/NDX to records? Tech earnings (83% beat rate) and AI euphoria (ARM +11%, AMD +4%), but strip out tech and Q1 earnings grew only 3% y/y—weakest in two years. The market is betting the Fed caves despite inflation remaining sticky and labor market softening. That's a fragile foundation.
If the Fed genuinely believes the inflation shock is transitory and labor market slack is real (jobless claims up, capex weak), then a pause IS justified and the market is correctly positioned ahead of June 16-17 FOMC—especially if the Iran deal holds and energy prices stabilize.
"The market is dangerously overextended, with record highs masking a weakening economic foundation and a reliance on geopolitical volatility that remains highly unstable."
The market's reaction to the Iran ceasefire is a classic 'buy the rumor' reflex that ignores the underlying macro deterioration. While the Nasdaq 100 hit record highs, we are seeing a clear divergence: Q1 earnings ex-tech grew only 3%, and the downward revision of Q1 GDP to 1.6% alongside rising jobless claims signals a cooling economy that cannot support current valuation multiples. The rally is overly dependent on AI-infrastructure momentum and a fragile geopolitical headline. If the ceasefire fails—or if the Fed maintains its hawkish stance despite slowing growth—the market will face a painful repricing as the 'soft landing' narrative loses its anchor.
The strength of AI-related earnings, such as Snowflake's massive beat and ARM's rally, suggests that structural productivity gains are decoupling tech from broader economic stagnation.
"This rally is a geopolitical relief bid, not a durable macro-driven upturn, and is vulnerable if inflation stays high or Iran tensions re-escalate."
The rally after Axios headlines looks like a classic relief bid rather than a sustainable uptrend. Briefly: S&P 500 and Nasdaq hit fresh highs on a ceasefire/negotiation story, but the underlying drivers remain fragile. Fed hawkish rhetoric persists and inflation remains too high for comfort; earnings are solid on average, but breadth is thin and the pace of revisions matters. Valuations are stretched, and oil price swings could reprice risk assets quickly. The Iran-related headlines are opaque; if the ceasefire stalls or sanctions shift, sentiment could flip. The move may reflect positioning ahead of the June FOMC meeting more than a durable macro shift.
Even if the Iran news sticks, the market could fade as inflation stays sticky and the Fed remains ready to tighten further; valuations are rich and breadth is narrow, so a relief rally around geopolitics often stalls when real data comes in.
"Hawkish Fed signals and sticky inflation create a higher reversal risk than any supposed AI decoupling from weak macro data."
Claude correctly flags the thin earnings breadth, but the overlooked risk is that three hawkish Fed speakers plus sticky core PCE at 3.3% make any June pivot unlikely even if growth slows further. This disconnect between tech-driven highs and macro reality could unravel faster than expected if Q2 data confirms the Q1 weakness without corresponding inflation relief from lower oil. The truce needing Trump approval adds another layer of fragility to the relief bid.
"A durable Iran ceasefire could give the Fed political cover to pause in June without reversing inflation credibility, making the current positioning less fragile than the panel assumes."
Grok flags Trump approval risk correctly, but everyone's overlooking the timing trap: if the ceasefire holds through June 16-17 FOMC, oil stays subdued, and that *softens* financial conditions enough to justify a Fed pause despite sticky core PCE. The market isn't betting the Fed caves—it's betting geopolitical relief + weak growth = permission to pause without looking dovish. That's actually coherent, not fragile. The real risk is if negotiations collapse *after* the Fed signals pause.
"Treasury issuance and sticky inflation will force long-end yields higher, rendering a Fed pause insufficient to sustain current equity multiples."
Claude, your 'timing trap' thesis ignores the fiscal reality: the US Treasury is currently flooding the market with T-bills to fund a massive deficit, which keeps liquidity tight regardless of oil-driven financial conditions. Even if the Fed pauses, the combination of a 3.3% core PCE and a slowing economy creates a stagflationary impulse that will force yields higher at the long end. The market isn't pricing a pause; it's pricing a policy error.
"Long-duration yields and wider credit spreads could derail the rally even if a Fed pause holds."
Gemini, your liquidity critique is compelling, but it overweights bill issuance without weighing duration risk. Even with heavy T-bill supply, the front end can stay liquid if the Fed signals a credible pause; the bigger risk is long-end yields rising as growth disappoints yet inflation sticks. If corporate credit spreads widen and AI capex fails to translate into durable earnings, a rapid repricing could hit equities despite a pause.
Despite a geopolitical relief rally, panelists express concern about slowing growth, sticky inflation, and overreliance on tech earnings. They agree that the market's disconnect from macro reality could lead to a rapid repricing if Q2 data confirms Q1 weakness.
None explicitly stated.
The market's overreliance on tech earnings and a slowing economy with sticky inflation, which could lead to a rapid repricing if Q2 data confirms Q1 weakness.