S&P 500 and Nasdaq Rebound as Markets Recover From Sharp Selloff

U.S. stocks moved higher on Monday, recovering from their steep losses in the previous session as investors welcomed reports suggesting that Iran had ended military operations against Israel.

The news helped improve market sentiment and eased some concerns surrounding geopolitical tensions that had weighed heavily on financial markets in recent days.

By midday trading, the S&P 500 gained 1% to 7,456.45, while the Nasdaq Composite advanced 1.6% to 26,123.67. The Dow Jones Industrial Average also moved higher, rising 0.3% to 51,026.41.

Three Major Themes Driving Markets

According to analysts at Vital Knowledge, investor attention remains focused on three key developments: geopolitical tensions involving Iran, the recent technology sector selloff, and the stronger-than-expected U.S. employment report.

These factors have been the primary drivers of market volatility and continue to shape expectations for monetary policy and economic growth.

Markets Recover After Worst Session of the Year

Monday’s rebound follows a difficult session for Wall Street.

The S&P 500 fell 2.6% on Friday, recording its largest single-day decline of the year and ending a nine-week winning streak.

The Nasdaq also suffered heavy losses as investors aggressively sold technology shares, particularly semiconductor companies.

A major contributor to the weakness was a decline of more than 10% in the Philadelphia Semiconductor Index, fueled by concerns surrounding Broadcom’s recent earnings and questions about the sustainability of the artificial intelligence investment boom.

However, semiconductor stocks stabilized on Monday, with Nvidia, Broadcom, and Micron all posting gains.

Strong Jobs Report Fuels Rate Hike Expectations

Investor sentiment was also pressured by the latest U.S. labor market data.

The May nonfarm payrolls report showed the U.S. economy added 172,000 jobs, significantly exceeding market forecasts.

The stronger-than-expected employment data reinforced expectations that the Federal Reserve could maintain higher interest rates for longer or potentially implement additional rate hikes if inflation remains elevated.

Rising Treasury yields following the report weighed on equities, particularly growth and technology stocks that tend to be more sensitive to interest rate expectations.

Iran and Israel Continue to Dominate Headlines

Geopolitical developments remain a major focus for investors.

According to Iran’s state-run Fars News Agency, Iranian armed forces announced the end of military operations against Israel.

The announcement followed a weekend of escalating tensions that threatened to derail a fragile U.S.-brokered ceasefire and raised concerns about a wider regional conflict.

Recent reports indicate that the latest exchange of attacks began with an Israeli strike near Beirut, Lebanon, followed by Iranian retaliation and additional Israeli military operations targeting locations in central and western Iran.

Despite reports of de-escalation, tensions remain elevated. Israeli authorities reported fresh missile alerts on Monday and confirmed the interception of a ballistic missile launched from Yemen.

Iran’s Islamic Revolutionary Guard Corps also claimed responsibility for attacks on military facilities in southern Israel.

Trump Remains Optimistic About Diplomacy

U.S. President Donald Trump stated that recent military exchanges would not derail ongoing efforts to negotiate a broader agreement with Iran.

However, reports suggest that some Iranian officials remain skeptical about the prospects of a near-term deal following the latest escalation.

Markets continue to monitor diplomatic developments closely, as any progress toward a lasting agreement could significantly influence energy prices and broader investor sentiment.

Oil Prices Stay Elevated

Although oil prices retreated from earlier highs, they remained elevated.

Brent crude oil was last trading around $94.79 per barrel, well below recent peaks above $100 but still considerably higher than levels seen before the conflict began.

Investors remain focused on the Strait of Hormuz, one of the world’s most important energy shipping routes. Approximately 20% of global oil and liquefied natural gas flows pass through the waterway.

The continued disruption of shipping activity in the region has contributed to higher energy prices and raised concerns about inflation.

Inflation Data Now in Focus

Market participants are increasingly concerned that higher oil prices could contribute to another wave of inflation.

Combined with the strong labor market report, rising energy costs have strengthened expectations that central banks may need to maintain restrictive monetary policies for longer.

Investors will receive additional clues later this week when the United States releases new Consumer Price Index (CPI) and Producer Price Index (PPI) data.

These reports are expected to play a key role in shaping expectations for future Federal Reserve decisions.

Notable Stock Movers

Among individual stocks, airline shares faced modest pressure as higher oil prices renewed concerns about fuel costs.

Southwest Airlines and Delta Air Lines both traded slightly lower during the session.

Meanwhile, Eli Lilly moved higher after announcing positive results from a clinical trial involving its next-generation treatment. The study showed benefits in weight loss, knee pain reduction, and sleep apnea treatment, boosting investor confidence in the pharmaceutical giant’s growth outlook.

Outlook

Wall Street’s rebound reflects improved investor sentiment following reports of easing tensions between Iran and Israel. However, concerns surrounding inflation, oil prices, Federal Reserve policy, and geopolitical developments continue to create uncertainty.

With key inflation data scheduled for release later this week, investors are likely to remain focused on economic indicators and central bank expectations as they assess the market’s next move.