Iran's token response to U.S. bombing of its nuclear facilities over the weekend was a well-telegraphed missile launch on U.S. bases in Qatar. That was quickly followed by U.S. President Donald Trump's acknowledgement of Tehran's intent to de-escalate and a call for a ceasefire that Israel said it would abide by.
Whether that ceasefire will hold remains uncertain, with some exchanges between Iran and Israel reported this morning and the situation still tense.
But as it stands before Tuesday's U.S. open, crude is just $66 per barrel - $12 below Monday's peak - and just slightly up from a two-week low of $64.38 earlier in the session. In fact, Oil is now down almost 18% year-over-year.
The S&P 500 rose 1% on Monday, and futures are up another 1% before Tuesday's bell. The VIX volatility gauge <.VIX> is back to where it was on June 12, just above 18, with the gold price falling as well.
The dollar skidded <.DXY> lower too, with the euro <EUR=> back within a whisker of 3-1/2-year highs and the yen <JPY=> recovering all of Monday losses. European and Asia shares surged more than 1% too.
Wall Street now switches attention back home to the Federal Reserve, with Fed Chair Jerome Powell starting his two-day, semi-annual congressional testimony today just as some of his colleagues have stated turning remarkably dovish on the interest rate outlook.
Trump clearly thinks the Fed should move immediately to slash rates by "two to three points". The president has been lambasting Powell on an almost daily basis for not doing so.
But Trump's appointees to the Fed board, Michelle Bowman and Christopher Waller, are now both advocates of easing sooner rather than later, opening up a big split between hawks and doves at the central bank. As many as seven policymakers last week indicated that they expected no rate cuts at all in 2025.
But Bowman, who recently was one of the most hawkish members of the Fed's policy making council, electrified the rates market on Monday by saying it's time to consider easing as soon as next month.
"Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market," said Bowman, now Fed Vice Chair for Supervision.
A parade of Fed speakers on Tuesday's slate could pour cold water on that view, but many market players think there is some jockeying for position going on at the central bank, with Trump expected to soon announce his pick to replace Powell when the Fed Chair's term expires next year.
Even though Fed futures markets are still only pricing in a roughly 20% chance of a July cut, full year easing bets rose almost 10 basis points to near 60 bp after the Bowman comments and oil price retreat.
Treasury yields responded quickly to the rate signals and energy relief, even with another heavy week of debt sales kicking off on Tuesday with $69 billion of 2-year notes up for grabs.
Benchmark 10-year yields <US10YT=RR> plunged below 4.3% for the first time in six weeks on Monday, though they've nudged back above that level again before today's bell.
Elsewhere on Monday, Tesla shares <TSLA.O> jumped over 9%after the electric-vehicle maker started testing its long-awaited robotaxi service, which CEO Elon Musk has touted as a driver of Tesla's lofty valuation.
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