US stock futures climbed on Monday as investor sentiment improved, driven by signs of a possible agreement between the United States and Iran over the reopening of the Strait of Hormuz. If the deal goes through, concerns over inflation and interest rate increases could ease, supporting riskier assets.
Negotiations over key provisions are still ongoing, and final approval from both sides could take several more days.
US stock and bond markets are closed on Monday for Memorial Day. During summer, markets will also be shut on June 19 for Juneteenth and July 3 for Independence Day, with an early close at 2 p.m. ET on July 2, and again on September 7 for Labor Day. The next US stock market holiday after that will be Thanksgiving, with bond market breaks before then.
Markets Sentiments
Wall Street remains in positive territory despite lingering risks. Major indexes ended last week higher, with the S&P 500 posting its eighth straight week of gains. The Dow rose 2.13% last week, the S&P 500 gained 0.88%, and the Nasdaq Composite added 0.45%, lifted by optimism over Middle East peace talks and strong corporate earnings.
Reuters reported that UBS Global Wealth Management has increased its 2026 year-end forecast for the S&P 500 to 7,900, up from 7,500, due to resilient consumer spending and high demand for data center infrastructure. Additionally, several brokerages, including Morgan Stanley, have raised their targets, with Morgan Stanley predicting 8,000, driven by AI-related investments and earnings optimism, while largely dismissing inflation risks from rising oil prices linked to the Middle East conflict. S&P 500 currently trades at 7,473.47, up over 28% in the last year and nearly 10% YTD.
Earnings Season
With more than 95% of S&P 500 companies having reported first-quarter results, earnings are on track to grow at their fastest pace in four years, with corporations beating estimates on both revenue and profit at an unprecedented rate.
The Magnificent 7 companies have also delivered strong results. As of March 31, the estimated earnings growth rate for the group for Q4 stood at 22.5%. All seven companies reported a positive earnings-per-share surprise, compared with 84% for the broader S&P 500, according to FactSet.
The Magnificent 7 posted actual earnings growth of 63.2% for the first quarter — the highest for the group since Q2 2021, when it stood at 89.2%. The remaining 493 S&P 500 companies reported blended earnings growth of 17.4% for Q1, also the highest since Q4 2021.
Four of the Magnificent 7 — Nvidia, Alphabet, Amazon.com, and Meta Platforms — are among the top five contributors to S&P 500 earnings growth in the first quarter, FactSet said.
Despite concentration risks, earnings growth estimates for 2026 for both the Magnificent 7 and the other 493 companies are higher today than they were on March 31, as analysts have lifted full-year EPS estimates for both groups.
Naeem Aslam, CIO at Zaye Capital Markets, shares a cautionary note with the investors. “The Magnificent Seven remain the main pressure point for the S&P 500 because their size means any weakness quickly affects index direction. The group is being punished where valuations look stretched, AI spending expectations are high, margins are under review, or growth is no longer surprising enough.
“Nvidia’s post-earnings reaction showed that even strong numbers are not always enough when expectations are extreme, while Tesla, Apple, Meta, Microsoft, Amazon, and Alphabet are being judged on demand, pricing power, AI returns, advertising trends, cloud growth, and capital spending. This is why the S&P 500 can look strong on the surface while many investors still question market breadth,” Aslam said.
Investors are looking ahead to upcoming US economic data, including PCE inflation, GDP, and personal income and spending figures, as well as earnings from Salesforce and Dell Technologies, among others.
US Fed: Rate cut or rate hike?
Markets remain divided on the prospect of a rate hike in the months ahead. After April’s CPI and PPI data showed a spike in inflation, rate-cut expectations shifted toward a possible hike at the December FOMC meeting.
Minutes from the April 28–29 FOMC meeting showed that a majority of Fed members indicated rates would need to rise if inflation stays above the 2% target. Both 10-year and 30-year bond yields also moved higher as markets priced in a higher-for-longer rate environment. U.S. 10 Year Treasury Note is currently at 4.563%, while the U.S. 30 Year Treasury Bond is at 5.068%. For now, the outcome of the Iran conflict and where the oil prices settle remain the most crucial factors shaping market direction.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice, financial guidance, or a recommendation to buy or sell any security or financial instrument. Readers are advised to consult a qualified financial advisor before making any investment decisions. Market conditions can change rapidly, and the data referenced herein reflects information available at the time of writing. Financial Express does not assume any liability for losses arising from the use of this information.