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The recent stock market rally hit a pause last week, as an Israeli airstrike on Iran sent oil prices higher and equities lower to end the first full trading week of June.
For the week, the S&P 500 (^GSPC) fell 0.6%, while the Nasdaq Composite (^IXIC) slid 1%. Meanwhile the Dow Jones Industrial Average (^DJI) dropped 1.3%.
This week, investors will have a close eye on rising tensions in the Middle East, particularly Iran's response. In scheduled events, the Federal Reserve's latest policy statement is set for release on Wednesday. The latest summary of Economic Projections (SEP) — including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future — will also be released at 2 p.m. ET followed by a press conference from Fed Chair Jerome Powell at 2:30 p.m. ET.
Elsewhere in economic news, the release of retail sales for the month of May will also gain investor attention on Tuesday. Markets will be closed for Juneteenth on Thursday.
On Friday, Brent crude futures (BZ=F) surged higher to just below $74 a barrel, while West Texas Intermediate futures (CL=F) changed hands at almost $73 as investors digested the Israeli missile launch on Iran. Both measures were up about 12% or more on the week.
The growing concern is that further escalation could push oil even higher and eventually weigh on inflation. JPMorgan head of global commodities research Natasha Kaneva wrote in a June 12 note to clients that, should escalations of the conflict become "severe," oil could rise to about a $120 barrel and push the Consumer Price Index (CPI) up to 5%. The latest data from the Bureau of Labor Statistics showed the prices increased 2.4% in May.
Given that trade concerns have stopped swinging markets, Bank of America Global Research chief investment strategist Michael Hartnett wrote in a note to clients on June 13 that the door is "wide open for stock bulls" as long as the pop in oil prices is "short-lived."
US economic growth data has largely remained resilient through the onset of President Trump's tariffs, and economists expect that trend to continue in the latest retail sales report.
The May retail sales report is expected at 8:30 a.m. ET on Tuesday, with economists anticipating sales fell 0.6% over the prior month. But retail sales excluding auto and gas are expected to have risen 0.4%. And the control group of retail sales, which excludes several volatile categories and factors from the gross domestic product (GDP) reading for the quarter, is anticipated to have risen 0.5% in May.
