Wall Street Dips Amid Escalating Global Tensions

June 17 Recap: Market Retreat

In an unsettling turn of events, U.S. markets took a notable step back on June 17, primarily influenced by escalating conflicts in the Middle East, particularly the Iran-Israel war. The Dow Jones Industrial Average fell by 0.70%, while the tech-heavy Nasdaq Composite Index and the S&P 500 recorded declines of 0.91% and 0.84%, respectively. As an investor at Extreme Investor Network, it’s critical to understand how geopolitical tensions can impact market sentiment and stock performance.

Retail Sales Data: A Gloomy Indicator

Adding to the bearish sentiment, the latest retail sales figures came in weaker than anticipated. A decline of 0.9% month-on-month in May followed a slight drop of 0.1% in April. Given that private consumption accounts for over 60% of U.S. GDP, this dip raises substantial concerns about consumer spending and, consequently, recessionary fears. This data serves as a reminder of the interconnectedness of various economic sectors and the ripple effect they can have on Wall Street.

Eyes on Jobless Claims and the Fed

Looking Ahead: Economic Indicators

On Wednesday, June 18, investor attention will pivot to initial jobless claims, a key indicator of labor market health. Economists predict a slight decline from 248,000 (week ending June 7) to 245,000 (week ending June 14).

A significant drop could dampen expectations for a Federal Reserve rate cut in 2025, placing additional pressure on risk assets. Conversely, higher jobless claims could bolster the case for monetary easing—potentially stimulating a lift in market sentiment.

The Fed’s Dilemma: Rate Decisions and Projections

As we gear up for the upcoming FOMC interest rate decision, the market will be closely analyzing not just the anticipated rate of 4.5%, but also economic projections and Fed chair Jerome Powell’s press conference. A stable or favorable unemployment outlook, alongside upward adjustments to GDP and inflation forecasts, may heighten demand for risk assets. Alternatively, more dovish projections could deliver a much-needed boost to market sentiment ahead of the European market’s response on June 19.

While these economic metrics are crucial, the influence of international conflicts and trade developments will likely weigh even more heavily on market dynamics in the near term.

DAX Outlook: Key Catalysts at Play

The short-term trajectory of the DAX remains uncertain, held hostage by external factors, including Middle Eastern tensions and trade negotiations. Here’s our breakdown of potential scenarios:

Bullish Case: Easing EU-U.S. trade tensions, a de-escalation of conflicts, and dovish FOMC projections could propel the DAX toward 24,000.
Bearish Case: U.S. military actions against Iran or heightened tariff threats may push the DAX closer to 23,000.

As of June 18, DAX futures were down by 129 points, while Nasdaq 100 mini futures noted an uptick of 24 points, signaling an indecisive trading session.

Military Actions: Market Sentiment Analysis

As per Polymarket, the likelihood of U.S. military action against Iran constricted to 73%, a decrease from 90% on June 16. This reflects a nuanced view among traders, particularly in the face of evolving global conditions.

Technical Setup: Cautious Optimism

Despite the bearish momentum observed on Tuesday, the DAX is still trading above the critical 50-day and 200-day Exponential Moving Averages (EMA), suggesting a base of bullish momentum that investors should not overlook.

Upside Target: A breach above the pivotal level of 23,500 may invite a move toward 23,750. Sustaining that momentum could set the stage for a retest of the coveted 24,000 level.
Downside Risks: Conversely, failure to maintain levels above the 50-day EMA may lead to testing sub-23,000 territory.

With a 14-day Relative Strength Index (RSI) standing at 44.24, the DAX still has room to decline without entering oversold conditions, making it a compelling point for cautious investors.

At Extreme Investor Network, we believe that a multifaceted approach, considering both macroeconomic indicators and geopolitical developments, is vital to navigate the complexities of today’s market. Stay tuned as we continue to unwrap these dynamics for you and help you trade wisely!