Fixed Income & Equities Markets Week in Review

US equities were on track for a positive holiday-shortened week as of Thursday morning, recovering from Wednesday’s post-FOMC selloff as investors rotated back into risk assets. While the Fed’s June meeting briefly pressured sentiment, a semiconductor-led rally helped push major US indices into positive territory. The iShares Semiconductor ETF (SOXX) was higher by more than 7.5% for the week as of Thursday morning, underscoring the continued importance of the group to broader equity market performance; semiconductors and semiconductor materials and equipment account for more than 17% of the S&P 500 Index.

The week began with a sharp risk-on move following the weekend announcement from President Trump that the U.S. and Iran had reached an agreement to end the conflict. Equities rallied and oil prices moved lower, with the Nasdaq Composite jumping more than 3% on Monday while WTI crude traded around $80/barrel. The Nasdaq’s advance marked its best trading day since late March when the US market began its 2026 rebound. For investors, a potential easing of energy-driven inflation pressure, with the Strait of Hormuz expected to reopen, was a key sentiment driver. However, the energy supply backdrop will likely take time to normalize, and although the 14-point memorandum of understanding was signed Wednesday, several key items still must be negotiated.

Against that early week backdrop, investors approached this week’s June FOMC meeting perhaps with the hope that lower oil prices and reduced geopolitical risk could spur the Fed to lean dovish. Instead, the meeting delivered a more hawkish tilt. As expected, policymakers left the fed funds target rate unchanged at 3.50%–3.75%, but Fed Chair Warsh’s first meeting at the helm provided little comfort that monetary policy easing was on the near-term horizon. The updated dot plot showed nine officials anticipated a rate hike this year. That compared to none in March, while the median projections for both 2027 and 2028 also moved higher. Market expectations adjusted accordingly, with the CME FedWatch Tool showing only a 14.5% probability that rates would remain unchanged through year-end and no probability of a rate cut. A week earlier, the probability that rates would remain unchanged in 2026 was 41.8%. Investors also noted the shortened FOMC’s statement, which included no forward guidance, as well as Warsh’s repeated emphasis on the Fed’s commitment to price stability. Taken together, the meeting reinforced the view that the Fed remains concerned about inflation, even as lower oil prices may eventually reduce price pressures. The S&P 500 and Nasdaq sold off by more than 1% on Wednesday in response.

Risk appetite had returned to the market by Thursday morning, with the S&P 500 and Nasdaq both higher by more than 1%. WTI traded below $80/barrel this week and sitting near $76/barrel Thursday morning, with oil’s price push lower unsurprisingly leaving the Energy sector as the week’s laggard among the 11 S&P 500 sectors. Through Wednesday’s close, Industrials and Financials led performance as investors favored cyclical stocks that could benefit from a potential economic boost that lower energy prices might provide. Despite some early week pressure, semiconductors also continued to be performance leaders, with the SOXX higher by 6.5% on Thursday morning, supported by strength in Micron Technology and Intel. Intel shares were helped by news that the company would partner with Apple to design and manufacture chips. Elsewhere, SpaceX (SPCX) cooled after its post-IPO surge, trading lower Wednesday and Thursday following strong gains on Friday, Monday, and Tuesday. At one point this week, SPCX carried a higher market capitalization than both Amazon and Microsoft. Looking ahead to next week, investors will likely be focused on Personal Consumption Expenditures (PCE) data and Fed official commentary post-June FOMC meeting.