S&P 500 Gains as AI and Rate Hikes Take Center Stage for Investors

The S&P 500 (Index: SPX) showed off the dueling forces of the ongoing AI boom and the rising likelihood of interest rate hikes affecting the direction of the U.S. stock market in the Juneteenth holiday-shortened trading week. Despite rising and falling during the week, the index ultimately ended up 0.9% at 7,500.58 as the prospect of gains from rapidly advancing AI technologies edged out the expected higher cost of borrowing for the firms making those big investments.

That outcome came after the a hawkish Fed sent stock prices falling on Wednesday, 17 June 2026 as expectations for two rate hikes in 2026 took hold. The CME Group’s FedWatch Tool has moved up the expected timing of a quarter point increase in the Federal Funds Rate to a target range of 3.75-4.00% three months earlier, now expected the move to happen after the Fed meets on 16 September (2026-Q3). The FedWatch tool also now anticipates a second quarter point rate hike on 9 December (2026-Q4).

There was some good news, in that the FedWatch tool no longer suggests a bias toward rate hikes in 2027 and even sees the potential for a quarter point rate cut by October (2027-Q4).

With the end of 2026-Q2 now in the past from a dividend futures perspective, investors look to have shifted their forward-looking focus away from the effectively ended quarter of 2026-Q2 to the distant future quarter of 2026-Q4 in setting current day stock prices. The latest update of the alternative futures chart shows the trajectory of the S&P 500 is most closely paralleling the dividend futures-based model‘s projected trajectory associated with investors setting their attention on 2026-Q4.

There was one other market moving event that had outsize influence over the direction of stock prices during the week that was. The U.S. and Iran reached an agreement to continue their ceasefire into November 2026 while they continue negotiating, which provided the momentume for the market’s gains on Monday. In the absence of other developments related to that geopolitical event, we anticipate its influence will continue waning.

Here are the market moving headlines for the week that was:

Monday, 15 June 2026

• Signs and portents for the U.S. economy:

• Iran, US agree to halt war and reopen Hormuz, sending oil prices tumbling

• Trump announces US and Iran have reached peace deal — here’s when the Strait of Hormuz reopens, and what happens next
• Treasury yields slide as Iran deal drives rethink on Fed interest rate hikes

U.S. crude drops below $80 for the first time since March as Iran deal is set to open Hormuz Strait

• U.S. gasoline slips below $4 a gallon for first time since April

Bigger trouble, stimulus developing in China:

• China’s Collapsing Job Market

BOJ minions still gung-ho to hike Japan’s interest rates, thinking about what more they need to do to bailout Japan’s currency:

• Iran peace deal won’t change BOJ’s rate-hike plans, ex-central bank economist says
• Why an Iran peace deal won’t pull the yen back from the brink

ECB minions thinking they might need to hike Eurozone interest rates again:

• ECB needs to do more to contain inflation pressures, Kazimir says
• ECB’s Nagel says no inflation relief in sight even if Hormuz Strait reopens soon
• ECB’s Lagarde welcomes Iran deal but inflation fears linger

Wall Street rallies, Dow ends with record on US-Iran deal, oil price slide

• Dow ends at all-time high as U.S.-Iran peace deal elevates optimism

Tuesday, 16 June 2026

• Signs and portents for the U.S. economy:

• US single-family housing starts slide to eight-month low; imported inflation increases sharply

• US import prices increase more than expected in May

Oil prices fall 5% to 3-month low on hopes Strait of Hormuz will open

• Stocks of oil in US Strategic Petroleum Reserve falls to lowest since 1983

Bigger trouble developing in China:

• China’s economic imbalance deepens as retail sales fall for first time in over three years
• China’s new home prices fall at faster pace in May on soft demand
• China’s EV Price War Was Built On Cars Sold At A Loss

BOJ minions act on long-held ambition to keep hiking Japan’s interest rates:

• Bank of Japan raises rates to 31-year high, flags more to come

• BOJ Policy Shift: Rates lifted to 31-year high of 1.0% to counter war-driven energy inflation
• BOJ Deputy Governor Uchida’s comments at news conference
• Bank Of Japan Raises Rates To 1% For The First Time In 31 Years, Will Stop Reducing Bond Purchases

ECB minions getting excited thinking about next Eurozone rate hikes:

• ECB will be proactive against high inflation even after Iran deal, Lane says
• Price pressures may linger due to damaged energy assets, ECB’s Makhlouf says

Bigger trouble developing in the Eurozone:

• EU must tap trillions of euros in private savings to keep up with US and China, investors say

Nasdaq and S&P 500 slip while Dow hits record close

• Wall Street ended mixed as SpaceX climbed and broader tech fell

• SpaceX vaults past Amazon’s market value as options listing fuels surge

Wednesday, 17 June 2026

• Signs and portents for the U.S. economy:

• US pending home sales increase to a six-month high in May

• “Late Spring Buyer Rush”: US Pending Home Sales Just Surged By The Most In Almost 2 Years

Container imports soar at busiest US port in May as buyers try to outrun rising fuel costs

Oil rises 1% on US-Iran deal doubts; IEA warns of supply glut

• Cushing Stocks Crash To ‘Tank Bottoms’, Seasonally Lowest Since 2005; SPR Sees Another Huge Drain
• Trump Admits US Was Weeks Away From “Running Out Of Reserves” When Iran Deal Struck

Fed minions hold Federal Funds Rate steady as expected, but sets expectation for rate hike later in 2026; new chief minion plans to shake up Fed’s operations:

• Fed begins Warsh era by keeping rates on hold, sees one hike later this year

• Warsh-led Fed expected to hold interest rates steady

Fed Holds Rates Unchanged (As Expected), ‘Dots’ Signal Hawkish Bias As Warsh Takes Over

• VIEW Fed holds steady in Warsh’s debut, but hawkish shift fuels bond-market rout
• Traders now see Fed raising rates by September
• Nearly half of Fed policymakers see a 2026 rate hike in the cards

Fed chief Warsh skips rate-path ‘dot,’ launches communications review

• Warsh flags new tasks forces to study Fed operations

Investors brace for less predictable Fed as Warsh rewrites playbook

Bigger stimulus developing in China:

• China to support IPOs by ‘future industry’ startups, large model companies

BOJ minions worried about inflation/falling value of currency in Japan, fueling plan to keep hiking Japan’s interest rates:

• BOJ deputy’s brief moment at the helm reveals deeper inflation anxiety
• Japan’s exports rise on weak yen, AI boom, but price-led gains mask weak volumes

Bigger trouble developing in Eurozone:

• Mood darkens among German auto suppliers as investment, hiring fall, survey shows

• BMW lowers profit outlook due to China downturn, Iran war double whammy
• Volkswagen reduces production at German plant amid uncertain future for site

Wall Street sinks on bets Fed will hike rates this year

• U.S. stocks erase gains, end lower as a hawkish Warsh raises concern among investors

• Indices Barely Move Ahead Of Fed Interest Rate Decision
• S&P 500 falls, yields rise following Fed announcement

Thursday, 18 June 2026

• Signs and portents for the U.S. economy:

• Oil falls to lowest since start of Iran war after ceasefire deal signed
• Investors brace for less predictable Fed as Warsh rewrites playbook

Bigger trouble, stimulus developing in China:

• China’s mid-year shopping festival highlights weak demand, rising role of AI
• PetroChina forecasts Chinese oil consumption will drop 4.9% this year

BOJ/JapanGov minions getting set to bail out Japan’s currency:

• Japan vows to act ‘any time’ on yen as markets brace for intervention

ECB minions getting excited thinking about more Eurozone rate hikes:

• ECB’s Lane hints at higher rates even after Iran shock
• ECB wage tracker shows muted pay pressure despite war inflation

S&P 500 closes higher, Nasdaq climbs nearly 2% as chips fuel comeback from Fed sell-off

• S&P 500 posts weekly gains as investors balance Fed concerns and AI optimism

• Wall Street ends higher as traders get past Fed outlook, U.S.-Iran deal lifts sentiment

Wall St indexes advance with boost from chips, Iran optimism

• Intel surges 9% after Trump says company will partner with Apple on U.S. chip design

The Atlanta Fed’s GDPNow tool‘s estimate of real GDP growth for the U.S. economy in the current quarter of 2026-Q2 dipped to +3.0%, falling back from the previous week’s real growth estimate of +3.3%.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull wearing a T-shirt that says ‘AI BOOM’ and a bear wearing a shirt that says ‘RATE HIKES’ where the bull asks ‘WHICH ONE OF US IS GOING TO WIN?’”