The North American session leaned firmly toward a risk-on tone, with equities pushing higher, oil easing, and yields drifting modestly lower. The backdrop for the move was driven largely by renewed diplomatic momentum, as talks between the U.S. and Iran appear to be gaining traction- with Pakistan playing a central role. While headlines throughout the day were at times inconsistent and even contradictory, the broader narrative pointed toward re-engagement rather than escalation.
U.S. envoy Witkoff and Jared Kushner are reportedly en route, while Iran’s foreign minister Abbas Araghchi is also expected to be in the region. Current indications suggest that all parties may first meet separately with Pakistani officials, with the possibility of more direct engagement emerging as late as Monday. Markets are clearly choosing to focus on the potential for de-escalation, and that optimism helped extend the rally in U.S. equities.
That optimism translated into record-setting performance on Wall Street. Both the NASDAQ and S&P 500 closed at all-time highs, with the S&P rising 0.80% and the NASDAQ surging 1.63%. Leadership once again came from mega-cap tech, with Nvidia, Alphabet, and Amazon all finishing at record levels. Meanwhile, Intel stole the spotlight with a staggering gain of over 23%. The turnaround in Intel highlights just how quickly sentiment can shift—what was recently an avoided name is now being embraced, even at elevated valuations near an 80x forward P/E. It’s a reminder that markets don’t wait for perfection—they anticipate it. It is either that, or the markets are inefficient and subject wild irrational moves at times.
Looking ahead, earnings will take center stage next week and could inject fresh volatility. Wednesday features reports from Amazon, Alphabet, Meta, and Microsoft—a heavyweight lineup that will test the sustainability of the current rally. On Thursday, Apple, Caterpillar, and Merck follow, adding further depth across both tech and industrial sectors.
In the fixed income space, yields edged lower but remain within recent ranges. The 2-year yield declined by 4 basis points to 3.784%, while the 10-year yield slipped 1.7 basis points to 4.305%. Despite today’s dip, yields still moved higher on the week, with the 10-year up 5 basis points and the 2-year rising 7.9 basis points. Attention now shifts to the Federal Reserve, with the FOMC set to meet next Wednesday. Expectations are firmly anchored for no change in rates, with the current target range centered around 3.75%. The focus will instead be on guidance and tone, particularly as markets weigh geopolitical risks against easing inflation pressures.
In the FX market, the U.S. dollar weakened as traders leaned into the improving risk backdrop and the prospect of reduced geopolitical tension. Lower oil prices and expectations of softer inflation down the road also contributed to the move. Commodity and growth-sensitive currencies led the gains, with the NZD and GBP each rising around 0.50%. The EUR advanced 0.32%, while the AUD gained 0.34%, reflecting a broader shift away from defensive positioning.
Oil prices told a slightly more nuanced story. WTI crude for June delivery fell 0.87% to $95, while July crude dropped 0.74% to $90.15, reflecting optimism around supply stability if tensions ease. However, Brent crude painted a more cautious picture, rising $1.11 (1.08%) to $106.20—suggesting that not all market participants are fully convinced that risks have been removed.
Bottom line: Markets are leaning into a more optimistic geopolitical narrative, driving equities to record highs and pressuring the dollar. However, with major earnings, a Fed decision, and ongoing geopolitical uncertainty ahead, the current calm may prove fragile.