Dow jumps 600 points as US-Iran pause lifts stocks ahead of Fed decision

• Oil prices fell sharply—Brent crude down 6.8% to $90.10 and WTI down 5.7% to $84.20—lifting airline stocks like United and Southwest (both up over 3%) while pressuring energy names like Exxon and Occidental (down about 2%).
• The Fed is widely expected to hold rates steady on Wednesday, though markets still price in at least 25 basis points of hikes later this year; June PCE inflation data due Thursday will provide further policy guidance.
• Big Tech earnings this week will test investor confidence in AI spending after recent concerns over rising capital expenditures; the Nasdaq remains about 8% below its record high and semiconductor stocks recently entered bear market territory.

Market Summary: Stocks Rally on US-Iran Pause Ahead of Fed Decision

Key Market Movements:

US equities rallied Monday with the Dow Jones jumping 602 points (+1.16%), S&P 500 up 0.79%, and Nasdaq Composite gaining 0.86%. The rebound followed a weekend pause in US-Iran hostilities, reversing last week's geopolitical tension-driven selloff.

Oil Price Impact:

Crude prices fell sharply on reduced Middle East supply disruption fears: Brent crude down 6.8% to $90.10/barrel and WTI declining 5.7% to $84.20/barrel. The VIX volatility index dropped to 17.77, signaling eased market anxiety.

Sector Winners and Losers:

Travel stocks led gains on lower fuel costs: United Airlines and Southwest Airlines rose over 3%, Royal Caribbean gained 2.7%, and Carnival advanced 4.3%. Energy stocks retreated: Occidental Petroleum and Exxon Mobil each fell approximately 2%.

Key Catalysts This Week:

• Federal Reserve Meeting (Wednesday): Markets expect rates unchanged, but pricing in at least 25 basis points of hikes later this year
• PCE Inflation Data (Thursday): June Personal Consumption Expenditures index will guide monetary policy outlook
• Big Tech Earnings: Microsoft, Amazon, Meta Platforms, and Apple reporting quarterly results

AI Investment Concerns:

Investor caution persists following concerns over AI spending sustainability. The Nasdaq is down 8% from record highs, while the Philadelphia Semiconductor Index entered bear market territory with a 20%+ decline. Upcoming tech earnings will test whether enthusiasm for AI infrastructure returns after Alphabet's increased capex and negative free cash flow raised concerns.

Geopolitical Risks:

Despite the pause, ongoing Houthi attacks on Saudi installations and reduced Strait of Hormuz shipping keep energy markets on alert.