Markets Seemed Ready to Move past Middle East Concerns but Wait!

• Just when it looked like the market was ready to move past the Middle East conflict to other matters, the war resumed with renewed vigor. Following an exchange of strikes overnight, President Trump said he believes the MOU/ceasefire with Iran “is over.” Iran said it launched attacks on US military targets in the region in response to a wave of strikes the US had initiated as “punishment” for attacks on ships near the Strait. While the initial attack Monday by Iran on a Qatar LNG carrier moved markets only slightly, the latest news has added more concern. In the initial attack, oil rose but managed to stay below $70/bb. With the latest developments, oil has moved decisively above $70/bb to $74/bb (see graph below). Equities are looking to open broadly lower, and with little of major consequence on the calendar this week, trading direction will come from the headlines around this latest dustup, unfortunately. Seems like Ground Hog Day, doesn’t it?  Currently, the 10yr is yielding 4.57%, up 4bps on the day, while the 2yr is yielding 4.20%, also up 4bps on the day.

 

• Today’s non-war highlight will be the FOMC minutes from the June 17 meeting. With the abbreviated post-meeting statement and with new Fed Chair Kevin Warsh declining to offer forward guidance, or thoughts on the Fed’s reaction function for policy moves, the minutes may provide more insight into current Fed thinking. What will be curious is if the minutes follow the abbreviated format of the statement and post-meeting commentary. In any event, it will be an interesting release. Next week Chair Warsh will be on Capitol Hill for his first of the semi-annual Humphrey-Hawkins appearances by the Fed Chair. So, if there’s any disappointment in the lack of information coming from today’s minutes, hopes will turn to his testimony and Q&A at next week’s meetings.

 

• The weekly ADP Pulse Report had an interesting finding that seems to match the slowdown in hiring noted in last week’s jobs report. The latest weekly average for the week ending June 20^th found 21 thousand private sector jobs. That’s down from a May average that was approximately 30 thousand per week and April with 35 thousand (see graph below). That slowing in new job creation aligns with the June jobs reported and its adjusted lower monthly totals. It could be the labor market is settling into a modest level of job creation in the mid-50 thousand range, with most of those coming in the healthcare sector.

 

• Meanwhile, the goods and services trade deficit widened to $77.6 billion in May, up $23.0 billion from $54.6 billion in April. May exports were $317.7 billion which is $10.5 billion less than April. May imports were $395.3 billion which is $12.5 billion more than April. The May increase in the goods and services deficit reflected an increase in the goods deficit of $23.6 billion to $106.5 billion offset slightly by the services surplus of $0.6 billion to $28.9 billion. Year-to-date, it’s a bit better story as the goods and services deficit decreased $203.9 billion, or 40.6%, from the same period in 2025. Exports increased $164.7 billion or 11.7%. Imports decreased $39.2 billion or 2.1%. The wider monthly deficit acts as a subtraction from GDP; so, after the latest trade report, the Atlanta Fed’s GDPNow Model for the second quarter GDP sits at a modest 1.4% (see graph below).

 

• Yesterday, the New York Fed released its June 2026 Survey of Consumer Expectations, which showed household inflation expectations increased at the short- and medium-term horizons and were unchanged at the longer-term horizon. As Middle East hostilities subsided, gas price growth expectations declined to the lowest level since August 2022. The survey ran from June 1 through June 30. Median inflation expectations at the one-year-ahead horizon increased by 0.2 percentage point to 3.7%, the highest level since September 2023. They also increased by 0.2 percentage point to 3.3% at the three-year horizon, the highest level since June 2022. Median expectations at the five-year horizon were unchanged at 3.0%.

• In addition to the weekly jobless claims series, Thursday also brings Existing Home Sales for June with 4.23 million sales closed vs. 4.17 million in May. That would represent a 1.9% increase in sales but still indicative of a market still searching for positive momentum. Existing sales have been mired in a range between 3.9 million and 4.27 million since 2023 and there’s not much on the horizon to indicate any new catalyst to drive sales activity higher.

 

---

ADP Weekly Job Growth Continues to Edge Lower

Source: ADP

---

May Trade (Goods & Services) Deficit Widened on Import SurgeSource: US BEA

---

Oil Moves Back Over $70/BB on Latest Iran War Developments

Source: CNBC

---

Latest 2Q26 GDP Estimate: 1.4% Annualized