Rising Middle East Tensions Trigger Market Rotation Away From Risk

Wall Street experienced a downturn last week. Investors were in a “risk-off” mood as the war in Iran escalated, while AI and semiconductor shares dropped, which dragged the overall market lower. Each of the major market indexes lost value, ending a streak of favorable weekly performances. Traders moved away from Megacap shares, which pulled prices lower. Energy, Consumer Staples, Real Estate and Financials outperformed, while Information Technology, Consumer Discretionary and Communication Services declined. Crude oil extended its gains to above $81.00 per barrel, reaching its highest level in a month, after Iran and the U.S. each launched more military strikes. 

June CPI Falls as Lower Energy Prices Ease Inflation Pressures

The Consumer Price Index (CPI) decreased 0.4% in June after rising 0.5% in May, the U.S. Bureau of Labor Statistics reported. This decline was the largest one-month decrease since April 2020, when it fell 0.8%. Over the last 12 months, consumer prices increased 3.5%. Energy prices fell 5.7% in June after rising 3.9% in May. The drop in prices for energy was the largest contributor to the monthly CPI decrease, more than offsetting increases for shelter and food. Prices for food increased 0.2% in June, while shelter prices rose 0.1%. Over the last 12 months, food prices are up 3.0%, and shelter prices rose 3.3%. Core prices, excluding food and energy, were flat in June but up 2.6% over the last 12 months. 

Eye on the Week Ahead 

This is a slow week for the release of notable economic data. However, the June figures on new home sales, released by the Census Bureau, are out this Friday. May saw new home sales drop over 7.0%, although both the median ($424,900) and average ($540,600) sales prices increased from their respective prior months’ estimates.