Market Update: Stocks Slip on Iran-Israel Escalation, McDonald’s Slides, CarMax Jumps, Gold and Oil Retreat

• Early Friday, US stock futures were flat as the deepening Israel-Iran conflict and the potential for direct US involvement weighed heavily on investor sentiment.
• The cautious open follows a muted session on Wednesday (S&P -0.03%), when investors digested the Fed's policy update. US markets were closedon  Thursday for a holiday.
• The Federal Reserve on Wednesday held rates steady and maintained its forecast for two rate cuts in 2025. However, it also revised its 2025 GDP growth forecast down (to 1.4%) and its core inflation forecast up (to 3.1%), signaling stagflation risks and drawing fresh criticism from President Trump.
• Notable premarket movers Friday included CarMax (+10%) and Darden (+3%) rising on earnings beats. GMS (+26%) surged on reports of a bidding war. Accenture (-3.7%) fell on weak new bookings. Jack in the Box (-1%) was downgraded due to concerns over immigration policy headwinds. Circle (+14%) continued its rally on stablecoin legislation progress.
• Israel-Iran tensions remained high. Mixed signals came from the US, with President Trump first suggesting Iran wants to negotiate, then escalating rhetoric. Israeli President Herzog clarified that dismantling Iran's nuclear program is a key objective.
• The US is actively considering its response, with the White House not ruling out a military strike and stating a decision could be made within two weeks. Evacuation flights for Americans in Israel are being arranged.
• The Bank of England held interest rates steady on Thursday with a 6-3 vote. An EU court advisor recommended upholding a record antitrust fine against Google.
• Global markets Friday saw Europe open higher but still on track for a weekly loss. Asia finished mixed; South Korea's Kospi hit a three-year high, while Japan slipped on hotter-than-expected inflation data. China's central bank held rates steady.
• US Treasury yields were relatively stable Friday morning (10-year around 4.417%) as investors balanced geopolitical risks and the Fed's policy stance.
• Gold prices fell Friday, pressured by a firmer dollar and Fed outlook. Oil also slipped, paring Thursday's sharp gains, after Trump's comments suggested a delay in direct US military action. Bitcoin held steady around $105k.
• Market sentiment remains on edge, dominated by the Israel-Iran conflict and uncertainty over potential direct US involvement. The Fed's mixed outlook for growth and inflation adds to investor caution.

Stock futures were flat on Friday as investors closely monitored the deepening conflict between Iran and Israel, and the potential for direct U.S. involvement. Tensions in the Middle East have ratcheted up, with both Iran and Israel continuing military strikes and their leaders exchanging increasingly combative rhetoric. The rising geopolitical risk, along with the possibility of escalation involving major powers, has injected fresh uncertainty into global markets. Russia warned that U.S. entry into the conflict could trigger a “terrible spiral of escalation,” further dampening investor sentiment.

Meanwhile, markets remained largely flat on Wednesday following the Federal Reserve’s latest policy update. As widely anticipated, the Fed held interest rates steady in the 4.25% to 4.5% range. However, the commentary that followed presented a mixed picture for markets. While the central bank maintained its forecast of two rate cuts by year-end, it also revised down its 2025 economic growth outlook to 1.4% and raised its core inflation estimate to 3.1%. Chair Jerome Powell signaled that policymakers would wait to assess the inflationary effects of President Donald Trump’s tariff policies before making any further rate decisions, leaving investors to weigh the implications of slower growth and stubborn inflation.

Global market sentiment remained fragile. U.S. equity exchanges were closed Thursday for a holiday, but futures slipped in evening trade as geopolitical concerns mounted. In Europe, travel and leisure stocks led declines, reflecting growing concern that the escalating Middle East conflict could disrupt international travel and weigh on economic activity. The heightened tensions and uncertain policy trajectory continue to cast a shadow over risk assets heading into the weekend.

US Market Previous Day:

The Dow Jones Industrial Average fell 44.14 points, or 0.10%, to close at 42,171.66. The S&P 500 slipped marginally by 0.03%, ending at 5,980.87, while the Nasdaq Composite inched higher by 0.13%, finishing the session at 19,546.27. The day’s trading was relatively muted, with investors continuing to weigh the implications of the Federal Reserve’s recent rate decision and ongoing geopolitical risks.

McDonald’s continued its downward trajectory, marking its fourth straight daily loss and its fifth consecutive weekly decline. The fast food giant is also on track for its largest monthly retreat since September 2022. Shares of McDonald’s fell to their lowest level since early February and are now trading below the 200-day moving average, a key technical support level. The stock’s relative strength index dropped to 24, indicating oversold conditions and its lowest reading since May 2024. Over the past month, McDonald’s shares are down 9%, sharply underperforming the S&P 500, which has gained nearly 1% during the same period.

US Futures Remain Flat:

• Dow Jones Industrial Average futures remained flat with a rise of 0.26%
• S&P 500 futures showed meagre gains of 0.23%
• Nasdaq Composite futures increased by 0.25%.

Biggest Premarket Movers

• CarMax: Shares jumped 10% after the used-vehicle retailer reported first-quarter results that exceeded Wall Street expectations. CarMax posted earnings of $1.38 per share on revenue of $7.55 billion, surpassing the LSEG consensus estimates of $1.16 in earnings per share and $7.52 billion in revenue, driven by resilient demand.
• GMS: The specialty building products stock jumped 26% following reports of a bidding war. QXO announced late Wednesday it was offering $95.20 per share for the company, and The Wall Street Journal reported on Friday that Home Depot had also privately made an offer, igniting investor enthusiasm. Shares of QXO rose 2.4% while Home Depot dipped slightly.
• Darden Restaurants: Shares were up nearly 3% after the Olive Garden parent company's fourth-quarter earnings beat on both the top and bottom lines. The company reported adjusted earnings of $2.98 a share and revenue of $3.27 billion, both slightly above LSEG consensus estimates. Darden also authorized a new $1 billion share repurchase program.
• Jack in the Box: The fast-food stock shed 1% following a downgrade to "hold" from "buy" at Stifel. The firm cited the Trump administration’s immigration policies as a potential headwind for the restaurant chain.
• Accenture: Shares fell 3.7% after the IT consulting firm reported a 6% drop in new bookings in its fiscal third quarter to $17.73 billion, missing analyst forecasts. The weaker bookings figure overshadowed an otherwise strong quarter where both overall revenue and earnings per share topped expectations.
• Circle: Shares of the stablecoin issuer continued their strong rally, climbing 14% in premarket trading. Investors remained enthusiastic following the Senate's passage of the GENIUS Act on Tuesday, a key piece of stablecoin legislation. The stock had already soared 33% on Wednesday.
• Kroger: The supermarket chain fell less than 1% as investors awaited its first-quarter earnings report. Analysts polled by LSEG are anticipating earnings of $1.46 per share on revenue of $45.19 billion.
• Regencell Bioscience: Shares dropped more than 17%, extending a period of extreme volatility. The decline followed a massive run-up earlier in the week driven by a 38-for-1 stock split, which saw the stock soar on Monday and Tuesday before falling sharply on Wednesday.

Israel-Iran War:

President Donald Trump told reporters outside the White House on Wednesday that Iran had signaled a willingness to negotiate, with Iranian officials suggesting they might even send a delegation to Washington. “They want to negotiate,” Trump said. “They even suggested that they come to the White House. That’s courageous. It’s like not easy for them to do.” His comments came amid escalating tensions in the Middle East, as the conflict between Israel and Iran entered its sixth day.

Markets had been downbeat earlier in the week as fears of a wider conflict pushed oil prices higher. Iranian Supreme Leader Ayatollah Ali Khamenei reiterated on Wednesday that Iran would not surrender and warned that the U.S. would “undoubtedly be met with irreparable damage” if it became directly involved in the conflict. Meanwhile, Israeli President Isaac Herzog clarified that a regime change in Iran was not an official objective but emphasized that dismantling Iran’s nuclear program was a key goal. Herzog, who accused Iran of “rushing to the bomb,” suggested that a change in regime could bring peace to the region and acknowledged the presence of diplomatic back channels to de-escalate the situation.

On Wednesday, Trump met for the second consecutive day with his national security team at the White House to discuss the evolving crisis. While he insisted that no final decision had been made on whether the U.S. would strike Iran, the administration was actively preparing options. U.S. Ambassador to Israel Mike Huckabee confirmed that evacuation flights and cruise ship departures were being arranged for Americans seeking to leave Israel.

At the same time, Israeli Prime Minister Benjamin Netanyahu was reportedly ordering military operations to target both strategic and governmental sites in Iran. Top diplomats from the U.K., France, and Germany were planning emergency talks in Geneva on Friday in a last-ditch diplomatic effort to cool tensions. The conflict, which intensified following the October 2023 Hamas terrorist attack on Israel, has since evolved into a broader regional struggle involving Iranian-backed groups such as Hezbollah in Lebanon and the Houthis in Yemen. While Tehran claims these groups are acting independently, the situation has raised the risk of a larger regional war — especially with signs pointing to potential direct U.S. involvement in the coming weeks.

Key Economic Data/News:

The U.S. Federal Reserve on Wednesday opted to keep interest rates steady in the 4.25% to 4.5% range, a level it has maintained since December. In its accompanying projections, the Fed’s “dot plot” signaled that two rate cuts are still expected before the end of 2025, offering some reassurance to markets hoping for easing ahead. However, the central bank also revised its inflation outlook higher, now expecting the personal consumption expenditures (PCE) price index to exceed 3% next year — a notable jump from its March estimate of 2.8%. This contrasts with April’s actual PCE reading of just 2.1%, suggesting that inflationary pressures may prove more persistent than previously anticipated.

Economic growth is also projected to slow, with the Fed lowering its 2025 GDP growth estimate to 1.4% from 1.7%, further hinting at stagflation risks. Fed Chair Jerome Powell, speaking in a post-meeting press conference, acknowledged that early effects of tariffs are being seen in inflation data, but emphasized that their full impact remains uncertain. “The size of the tariff effects, their duration and the time it will take are all highly uncertain,” Powell said. “That is why we think the appropriate thing to do is to hold where we are as we learn more.”

President Donald Trump, however, expressed frustration with the Fed’s cautious approach. Earlier in the day, he said the fed funds rate should be at least two percentage points lower and derided Powell as “stupid.” On Thursday, Trump escalated his criticism, calling Powell “destructive” in a Truth Social post and claiming the Fed’s decision was costing the U.S. “hundreds of billions of dollars.”

Across the Atlantic, the Bank of England also left its benchmark interest rate unchanged at 4.25% during its Thursday meeting. The decision saw six members of the Monetary Policy Committee vote to hold rates steady, while three favored a 25-basis-point cut. The central bank noted persistent economic weakness, including a loosening labor market and slowing wage growth. It expects wage pressures to ease significantly over the rest of the year. Still, officials emphasized that global uncertainty remains high, especially as energy prices have been rising amid the ongoing conflict between Israel and Iran.

“The Committee will remain sensitive to heightened unpredictability in the economic and geopolitical environment,” the BOE said, adding that it will continue reassessing risks to the economy as global conditions evolve. Markets are now eyeing August as the likely timing for a rate cut in the U.K.

Earnings Season/Company News:

Google faced a legal blow on Thursday as an advisor to the European Union’s top court recommended that the company’s appeal against a record 4.1-billion-euro antitrust fine be dismissed. Juliane Kokott, advocate general at the European Court of Justice, urged the court to uphold the earlier ruling by the General Court, which in 2022 had already slightly reduced the original 4.34-billion-euro fine to 4.125 billion euros. The fine is tied to long-standing antitrust concerns related to Google's Android operating system and its alleged misuse of market dominance.

Meanwhile, Meta’s earlier attempt to acquire Safe Superintelligence, the artificial intelligence firm launched by OpenAI co-founder Ilya Sutskever, was unsuccessful, according to sources familiar with the situation. Sutskever declined both the acquisition offer and Meta’s effort to hire him. However, as part of a separate arrangement, Daniel Gross and Nat Friedman — who run the VC firm NFDG — will be joining Meta, reflecting CEO Mark Zuckerberg’s ongoing push to deepen the company’s AI bench strength.

Global Market Trends:

European markets traded higher on Friday, with the pan-European Stoxx 600 index up 0.6%. Gains were broad-based across most sectors, although oil and gas stocks underperformed amid declines in crude prices. The Stoxx Europe Oil and Gas index edged down 0.1%, while Brent crude futures slipped $1.78, or 2.3%, to $77.07 a barrel, pressured by concerns about demand and Middle East volatility. Germany’s DAX led the regional gains with a 1.2% jump. Despite Friday’s strength, the Stoxx 600 remains on track for a weekly loss of 1.1%.

In Asia-Pacific, markets ended the week on a mixed note as investors weighed ongoing geopolitical tensions and policy signals from China. The People’s Bank of China kept its benchmark 1-year and 5-year loan prime rates unchanged at 3.0% and 3.5%, respectively. Mainland China’s CSI 300 index closed flat at 3,846.64, while Hong Kong’s Hang Seng Index climbed 1.26% to 23,530.

Japan’s Nikkei 225 slipped 0.22% to close at 38,403.23, and the Topix index fell 0.75% to 2,771.26 as core inflation rose to 3.7% in May — its highest since January 2023 and slightly above expectations. South Korea’s Kospi index broke above the 3,000 mark for the first time in over three years, closing 1.48% higher at 3,021.84. The small-cap Kosdaq added 1.15% to finish at 791.53. In Australia, the S&P/ASX 200 declined 0.21%, ending the day at 8,505.50 after paring earlier losses.

Debt Market:

U.S. Treasury yields were relatively stable on Friday, as investors continued to track developments in the Israel-Iran conflict and assessed the potential for U.S. military involvement. The yield on the benchmark 10-year Treasury note rose slightly, climbing over 2 basis points to 4.417%. The 2-year Treasury yield was nearly unchanged, holding at 3.952%, while the yield on the 30-year bond also inched up more than 2 basis points to 4.92%. With geopolitical tensions high and the Federal Reserve maintaining its cautious stance, bond markets showed little conviction in either direction.

Commodities and Other Assets:

Gold prices declined on Friday and were set for a weekly loss. While geopolitical turmoil typically boosts safe-haven demand, gold’s appeal was dampened by a firmer U.S. dollar and expectations that the Federal Reserve may cut interest rates less aggressively than previously thought. Traders were largely on the sidelines amid the fluid situation in the Middle East, avoiding strong directional bets. Macroeconomic headwinds — including steady yields and a rising dollar — also pressured bullion. The dollar was on track for its largest weekly gain in over a month, making gold more expensive for non-dollar holders.

Oil prices slipped on Friday, paring Thursday’s sharp gains after President Donald Trump signaled that the U.S. would delay any military action against Iran to allow room for potential negotiations. On Thursday, crude prices had surged nearly 3% following a dramatic escalation, with Israel reportedly targeting Iranian nuclear facilities and Iran retaliating with missile and drone attacks, including a strike on an Israeli hospital. Despite Friday’s pullback, oil remains volatile, with the week-long conflict showing no signs of de-escalation and markets bracing for further supply risks involving OPEC member Iran.

Bitcoin held steady near the $105,000 level, continuing its sideways movement amid a backdrop of mixed sentiment across global markets. This price range has emerged as a key technical support, as traders balance the Federal Reserve’s hawkish signals with mounting geopolitical concerns. Despite the potential headwinds from policy tightening, Bitcoin’s resilience suggests that investors are also positioning for elevated geopolitical risk. The cryptocurrency is on track for a second consecutive week of mild losses, though its overall trend remains bullish as it consolidates near its all-time highs reached earlier in June.

Market Sentiment:

Investors remain on edge as tensions in the Middle East persist, with the conflict between Israel and Iran showing little sign of de-escalation. President Donald Trump is still considering direct U.S. military involvement, including a potential strike on Tehran. The White House said on Thursday that a final decision is expected within the next two weeks. Trump’s demand for Iran’s “complete surrender” was swiftly rejected by Iranian Supreme Leader Ayatollah Ali Khamenei, who called the statement “threatening and ridiculous.”

The market is grappling with several unresolved questions that could determine the direction of equities in the weeks ahead. Chief among them are whether Iran’s energy infrastructure will suffer long-term damage, if its nuclear capabilities will be neutralized, and whether regime stability will come into question. The answers to these uncertainties will shape investor sentiment and the market's ability to price in the geopolitical risk.

For the week, the S&P 500 is modestly higher, up 0.07%. The Dow Jones Industrial Average has dipped by 0.06%, while the tech-heavy Nasdaq Composite has outperformed, gaining around 1%. On the economic front, investors will turn their attention to fresh data on Friday, including the Philadelphia Fed’s manufacturing survey and the Conference Board’s leading economic indicators report for May. These figures will help shape expectations around growth and may influence the Federal Reserve’s path forward on interest rates.