Nasdaq 100 and S&P 500: Stock Index Futures Rally as Oil Sell-Off Lifts Sentiment

• June E-mini Dow futures rose nearly 400 points while S&P 500 futures gained close to 1%, driven by reports suggesting the Strait of Hormuz could reopen and progress in U.S.-Iran discussions
• Over 90% of S&P 500 companies have reported first-quarter earnings with strong growth, but investor focus is shifting from earnings season to economic data and rising Treasury yields
• The PCE inflation report due Thursday is the week's key event, with market expectations evolving from anticipated rate cuts earlier in 2026 to concerns about rates remaining elevated longer

Market Summary: Stock Futures Rally on Oil Decline

Key Market Movements:

U.S. stock index futures opened the Memorial Day holiday week with strong gains. June E-mini Dow futures rose nearly 400 points, S&P 500 futures gained close to 1%, and Nasdaq-100 futures led with gains exceeding 1.3%. Oil prices dropped more than 5% overnight, triggering the risk-on sentiment.

Primary Catalyst:

The rally stemmed from easing geopolitical tensions surrounding Middle East energy supplies. Reports suggesting potential reopening of the Strait of Hormuz and President Trump's comments indicating progress in Iran discussions helped remove the geopolitical premium from crude prices. Technology and growth stocks attracted significant buying interest as inflation concerns eased.

Earnings Season Transition:

Over 90% of S&P 500 companies have reported first-quarter results, with strong earnings growth supporting markets year-to-date. As earnings season concludes, investor focus is shifting toward economic data and inflation readings.

Bond Market Concerns:

Treasury yields continue climbing, with the 10-year Treasury yield approaching early 2025 levels and the 30-year yield reaching multi-year highs. While not immediately negative, rapid increases could pressure stock valuations through higher borrowing costs.

Week Ahead:

The critical event is Thursday's PCE inflation report—the Federal Reserve's preferred inflation measure. A softer reading would support the positive momentum, while a hotter number could quickly reverse sentiment. Upcoming earnings from major retailers including Costco, Best Buy, and Dollar Tree will provide insight into consumer spending patterns.

Market Implications:

Lower oil prices removed immediate inflation pressures, but elevated Treasury yields and persistent inflation concerns remain significant headwinds. Market expectations have shifted from anticipating rate cuts to considering prolonged elevated rates.