US Market Wrap: AI Volatility, Softer Oil, and Fed Rate Concerns Drive Mixed Sentiment

Index Update

US equities ended mixed on Wednesday as weakness in heavyweight tech and semiconductor stocks pressured the S&P 500 and Nasdaq 100, while the Dow gained 182 points on support from traditional sectors. Micron, Qualcomm, and Sandisk declined amid concerns over excessive AI-related capital spending, though lower Treasury yields and easing Middle East supply risks helped support broader market sentiment.

Market Movers

Among the top-performing stocks of the session Sky Quarry Inc. surged 59.76%, while IceCure Medical Ltd. rallied 51.96%. On the losing side, Hertz Global Holdings, Inc. fell 40.71%, while TOYO Co., Ltd. declined 38.82%, making them the weakest performers during the trading day.

Commodities Update

WTI crude fell below USD 70 per barrel and Brent declined below USD 73 per barrel, extending losses for a fourth consecutive session as improving US-Iran peace prospects eased concerns over supply disruptions and erased nearly all the gains recorded since the Middle East conflict began. Market sentiment weakened as confidence in a lasting agreement encouraged more tanker traffic through the Strait of Hormuz, while increased crude exports from the Middle East and West Africa, along with a temporary US waiver allowing purchases of already-loaded Iranian oil, boosted available supply. Adding to the bearish outlook, Brent's prompt spread shifted into contango for the first time since the conflict began, indicating expectations of ample near-term oil supply.

Gold fell below USD 4,000/oz and silver dropped below USD 57/oz on Thursday, pressured by a stronger US dollar and rising expectations of Federal Reserve rate hikes. A firmer dollar made precious metals more expensive for overseas buyers, while markets priced in a potential September rate hike and further tightening before year-end, outweighing support from easing US-Iran tensions and lower oil-driven inflation risks.

Macro Updates

US PCE Inflation Expected to Remain Elevated

US PCE inflation is expected to accelerate in May 2026, with headline PCE rising 0.5% month-over-month and 4.1% year-over-year, driven by higher energy costs linked to the Iran conflict. Core PCE is also projected to increase to 0.3% monthly and 3.4% annually, reinforcing concerns that inflation remains well above the Fed’s 2% target and supporting expectations of a tighter monetary policy stance.

Dollar Holds Firm on Fed Rate Hike Expectations

The dollar index traded near 101.5 on Thursday, staying close to its highest level in over a year as investors priced in potential Federal Reserve rate hikes later this year. Expectations of tighter policy outweighed easing inflation concerns from lower oil prices, while markets awaited the PCE inflation report, GDP, income, durable goods, and jobless claims data for further direction.

Bonds Commentary

The US 10-year Treasury yield hovered around 4.4% on Thursday after a sharp decline, as easing US-Iran tensions pushed oil prices lower and reduced inflation concerns. Investors remained focused on the Fed’s policy outlook, with upcoming PCE inflation, GDP, income, durable goods, and jobless claims data expected to guide future interest rate expectations.

Futures Update

Nasdaq 100 futures rose 2% on Thursday, supported by renewed AI optimism after Micron’s strong earnings and upbeat revenue outlook, while S&P 500 and Dow futures gained 0.6% and 0.1%, respectively. Micron surged over 15% after hours, Qualcomm jumped 13% on a higher long-term non-handset revenue target, and broader semiconductor stocks advanced, with investors now awaiting the Fed’s preferred PCE inflation report.

Major U.S. equity markets failed to maintain their early advances on Wednesday, retreating during the latter half of the session to close on a mixed note. The late-session weakness was primarily driven by profit-taking, while investor sentiment remained cautious amid concerns that persistently elevated inflation could prompt further interest rate hikes. The S&P 500 is currently exhibiting a cautious near-term outlook, retreating toward its 21-day EMA after struggling to hold gains near the recent peak around 7,600. Despite the pullback, the broader trend remains constructive, with the index still trading above its 50-day EMA. However, weakening momentum is evident, as the RSI has slipped below the neutral 50 level, signaling a loss of bullish strength. Holding above the key support zone between 7,320 and 7,350 could pave the way for renewed buying interest, whereas a decisive break below this range may expose the index to additional short-term downside pressure.