Markets Rally as Trump Halts Iran Strike, Oil Tumbles and a Pivotal Data Week Begins

The dominant force shaping markets this morning is geopolitical relief. President Trump's decision to stand down a planned military strike on Iran and resume negotiations over the Strait of Hormuz has cleared one of the most significant overhangs that weighed on sentiment through July. Brent crude fell more than 5% to $83.44 per barrel, a move reinforced by OPEC+ agreeing to lift production by roughly 188,000 barrels per day. Lower energy prices ease inflationary pressure and give the Federal Reserve slightly more room to hold its current stance. S&P 500 futures are up 0.6%, Nasdaq-100 futures are gaining 0.8%, and Dow futures have advanced 1.0% ahead of the open.

The macro backdrop carries a few complicating threads. The Fed held its benchmark rate at 3.5%-3.75% for a fifth consecutive meeting, but three regional presidents dissented in favor of a hike, and the CME FedWatch Tool now prices a nearly 65% probability of a September increase. The 10-year Treasury yield edged down to 4.69% this morning, yet the Michigan survey's year-ahead inflation expectations remain at 4.2%. Consumer sentiment rose to 55.2, but the gap between improved confidence and still-elevated rate expectations reflects the bind the Fed continues to navigate.

The corporate earnings picture provides genuine support. With more than 60% of S&P 500 companies having reported Q2 results, year-on-year EPS growth stands at approximately 29% with an 86% beat rate — the highest in five years. What is arguably more meaningful for the market's longer-term trajectory is that upward estimate revisions for Q3 have broadened beyond technology and energy into finance, industrials, and utilities, suggesting the expansion is becoming less concentrated. Morgan Stanley strategist Michael Wilson has set a year-end S&P 500 target of 8,000, up from Friday's close of 7,489.72, citing improving earnings breadth.

Tonight's headline event is Palantir Technologies reporting Q2 results after the bell. The company posted record Q1 revenue of $1.63 billion, but its shares have fallen more than 26% year-to-date amid growing AI competition. On the single-stock front, Tesla appears to be extending a recovery toward a third consecutive gain following a more than 20% decline over six sessions after its July 22 earnings miss. Bristol Myers Squibb surged in premarket trading on reports of merger discussions with AstraZeneca potentially valued near $400 billion, which would rank among the largest pharmaceutical combinations in history.

The economic calendar is dense. This morning's ISM Manufacturing PMI for July is forecast at 54.0, up from June's 53.3, which would mark six straight months of expansion if confirmed. Wednesday delivers the ADP Employment Report, with private payroll additions forecast at 70,000, down from the prior 98,000. The week's most consequential release arrives Friday with July Non-Farm Payrolls. Consensus stands at 83,000 — an improvement over June's 57,000, which missed expectations of 110,000 by a wide margin. Two consecutive weak prints have placed Friday's number in sharp focus for rate path expectations.

In crypto, Bitcoin is holding near the $62,000-$63,000 support zone but remains under pressure from an ongoing Coldcard hardware wallet exploit that has drained between $89 million and $114 million across nearly 4,600 addresses over five days. Spot Bitcoin ETFs recorded over $220 million in inflows, suggesting institutional demand has not evaporated, but the long-short ratio leans slightly bearish in derivatives markets. Whether Bitcoin can rally alongside equities on today's Iran news will be telling — a failure to participate would confirm the exploit overhang is the dominant near-term headwind rather than macro conditions.

A coordinated U.S.-Japan currency intervention over the weekend pushed the dollar from near 164 yen to approximately 155-156 yen, the first such joint action since 2011. The yen's prolonged weakness stems from the wide interest rate differential between the Bank of Japan's 1.0% policy rate and the Fed's 3.5%-3.75%. The intervention introduces potential carry trade unwind dynamics that could ripple into equity positioning. With the ISM print due this morning and Friday's jobs report closing out the week, the durability of today's rally will be tested quickly.