Iran Deal Signed, Warsh's Hawkish Hold, and the Dot Plot Flips

A week that began with euphoria over an imminent Iran peace deal and ended with shellshock from a hawkish Fed dot plot still managed to deliver broad equity gains. The S&P 500 added +0.93% to 7,500.58, the Nasdaq surged +2.43% to 26,517.93, the Dow gained +0.71% to 51,564.70, and the Russell 2000 advanced +1.22% to 2,979.77. The lone laggard was the broader NYSE Composite at -0.41% to 23,499.74, reflecting weakness in energy and financials. The path was anything but linear: a strong Mon-Tue rally on the Iran deal and a +0.9% May retail sales beat gave way to a brutal Wednesday selloff (S&P -1.21% : the worst first-meeting Fed day for any new Chair since 1994) before Thursday's powerful +1.08% recovery. The VIX wavered around 18-21, the 10-year actually FELL 2 bps to 4.46%, but the DXY spiked to 100.80 : its highest reading since May 2025.

Sunday June 14 brought the headline of the year. After months of negotiation mediated by Oman and Pakistan, the U.S. and Iran reached an initial 14-point framework agreement: a 60-day ceasefire extension, full reopening of the Strait of Hormuz to all shipping (toll-free for 60 days), immediate lifting of the U.S. naval blockade, oil sanctions relief, and a window for nuclear negotiations. Presidents Trump and Iran's leader formally signed the memorandum of understanding on Wednesday June 17. Markets responded violently: WTI crude crashed 5.8% Monday to $76.05, hit a 15-week low intraweek, and ended the week at roughly $75.70 (-10.2% wk) after a brief Friday-style bounce as Switzerland talks paused for final language. Brent slipped below $80 briefly. The 10-year initially rallied (lower oil = lower inflation = lower yields) before the Fed reset everything Wednesday.

Warsh's First Meeting: A Hawkish Reset

Wednesday June 17 was meant to be a sleepy hold. The FOMC indeed left the federal funds rate unchanged at 3.50-3.75% by a unanimous 12-0 vote. But the Summary of Economic Projections delivered a shock. The median 2026 dot moved from 3.4% in March to 3.8%, implying the next Fed move is now a HIKE, not a cut. Nine of 18 voting and non-voting members now project at least one rate hike before year-end (up from zero in March), with six expecting two 25-bp hikes and one looking for three. Chair Warsh, in his debut press conference, stripped the easing bias from the statement (trimmed to 130 words from 341), announced five review task forces (inflation framework, productivity/AI, data methodology, communications, balance sheet), and notably did not submit his own rate projection. The dollar surged, gold initially sold off, and the S&P 500 plunged 1.21% : the largest negative reaction to a new Chair's first meeting since 1994.

The Thursday Rebound: Risk-On Returns

Thursday June 18 brought a powerful relief rally. Russell 2000 +2.12%, Nasdaq +1.91%, S&P 500 +1.08% as the market digested that "hawkish hold" still means a hold, and lower oil (Iran deal) was actually doing the Fed's inflation-fighting work for it. The U.S. formally ended its Iran naval blockade. Initial jobless claims dropped, and Philly Fed turned positive. The 2-year yield, which had spiked 16 bps intraday Wednesday, settled back. SpaceX (SPCX), now the sixth-largest U.S. publicly traded company, gained another 4%. All five major indices except NYSE Composite finished the truncated 4-day week higher.

Retail Sales: The Consumer Holds (Even at the Gas Pump)

Tuesday June 16's May retail sales surprised to the upside at +0.9% MoM (vs. +0.5% expected), with the control group (which feeds GDP) rising +0.7%. Gas station sales jumped +3.4% on Iran-war prices, but stripping that out, broad-based strength was apparent across electronics, restaurants, and online. Combined with the May jobs report (+172K) and ISM Services (54.5%), the data continues to push back against any 2026 recession narrative, and effectively gave the Fed cover to keep rates restrictive longer.

May PCE Thursday, Final GDP, and the Reaction Function Test

The post-Juneteenth week reorients to one number: May core PCE inflation on Thursday June 25. With CPI at 4.2% YoY and core CPI at 2.9%, market consensus expects headline PCE near 4.1% YoY (+0.5% MoM) and core PCE around 3.4% YoY (+0.3% MoM). This is the Fed's preferred gauge, and after Warsh's hawkish reset Wednesday, ANY upside surprise reinforces the new hike-bias narrative. A downside surprise (especially in core services ex-housing) would give the doves their first real ammunition. Also Thursday: Q1 GDP final revision and durable goods. May personal income and spending Friday.

Mon Jun 22: Existing Home Sales May

First housing data of the week at 10:00 AM ET. April was at a seven-month low (4.02M annualized). With mortgage rates near 6.5%+ and the Fed signaling potential hikes, expect continued softness.

Tue Jun 23: Consumer Confidence June

Conference Board June Consumer Confidence at 10:00 AM ET. May printed at 92.8 above expectations. Watch the present-situation vs. expectations gap and the "very likely recession" share.

Wed Jun 24: New Home Sales & 5Y Auction

New home sales for May 10:00 AM ET. Treasury 5-year auction afternoon, the first test of duration appetite post-hawkish FOMC.

Thu Jun 25: May PCE, Q1 GDP Final, Durable Goods

The headliner. Personal income and outlays at 8:30 AM ET delivers May PCE. Q1 GDP final at the same time (prior +2.0% on 2nd estimate). Durable goods. Jobless claims. 7-year Treasury auction PM.

Fri Jun 26: Final Michigan Sentiment

Final June consumer sentiment 10:00 AM ET (prelim was 48.9, from May's record-low 44.8). 5-10Y inflation expectations are what the Fed will dissect; prelim was 3.4%. Personal income/spending also.

With WTI at $75.70 (down from $96+ a month ago), the dollar at 101, and the S&P 500 at 7,500.58, the post-Juneteenth landscape sets up an interesting battle: the Fed says hike, but the Iran deal is doing inflation-fighting work the Fed can't. A cool May core PCE (below 3.3%) reignites the bull case dramatically. A hot print (above 3.5%) would push the 10-year through 4.55%, the DXY through 102, and likely cap the equity rally. Warsh's first month has already rewritten the macro narrative; PCE Thursday tells us whether the data agrees.