After a volatile stretch driven by geopolitical tension, the U.S. stock market is showing signs of optimism. With a ceasefire now in place between Israel and Iran, futures are rising and investors are re-evaluating opportunities in undervalued equities. Here’s what’s driving markets today.
Ceasefire lifts sentiment despite lingering risks
President Trump announced early Tuesday that a ceasefire between Israel and Iran had taken effect. Equity futures responded positively—Dow futures rose 350 points, while S&P 500 and Nasdaq futures climbed 0.9% and 1.2%, respectively.
Oil prices, a key barometer of geopolitical stress, fell over 3%, signaling market belief that escalation is unlikely. Brent crude and WTI retreated, calming energy sector volatility that had flared up after the U.S. struck Iranian nuclear sites.
Despite ceasefire news, analysts at Barclays cautioned that market vulnerability remains. “Vol Control funds have doubled equity exposure since April lows,” they warned, adding that further shocks could prompt rapid de-risking.
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Fed pause reinforces market resilience
Markets are also digesting last week’s Federal Reserve decision to hold interest rates steady. Chair Jerome Powell signaled continued data dependence, with PCE inflation data—due later this week—set to be a key input.
While the Fed projects two cuts later this year, persistent inflation risks, amplified by tariffs, could delay any shift. Still, falling CPI and PPI suggest disinflationary trends are taking hold, a positive sign for equities.
Economic indicators to watch this week
- PCE Inflation (Friday): Fed’s preferred metric. Consensus expects a mild 0.1% month-over-month increase.
- Durable Goods Orders: Volatile due to tariff-related inventory shifts.
- PMI Reports: Will help gauge real-time economic momentum.
FedEx earnings: A real-time economy read
FedEx will report this week and is seen as a bellwether for economic health. Analysts expect insights into consumer and B2B demand, with guidance likely reflecting tariff distortions. The stock trades at 12.3x forward earnings—roughly in line with fair value.
Undervalued stocks in focus
Morningstar’s latest episode of The Morning Filter highlighted four stocks trading well below their fair value estimates:
- Salesforce (CRM): 4-star stock, 20% discount. Benefiting from AI-driven growth, including its Agentforce platform.
- Clorox (CLX): 4-star, 32% discount. A normalization play after pandemic highs and a cyberattack slump.
- Thermo Fisher Scientific (TMO): 5-star, 37% discount. Rebounding from post-COVID normalization, with solid long-term growth outlook.
- Occidental Petroleum (OXY): 4-star, 23% discount. A hedge for inflation and geopolitical risk; backed by Berkshire Hathaway.
Tech names reacting to earnings and product news
- Marvell Technology (MRVL): Remains undervalued even after a 10% jump following its AI chip webinar. Analysts reaffirm market leadership.
- Advanced Micro Devices (AMD): Showcased new AI products but remains 7% above fair value. Analysts see it as the No. 2 AI player behind Nvidia.
- Meta Platforms (META): Slightly undervalued at 10% below fair value. New ad monetization on WhatsApp factored into long-term growth.
Housing, consumer trends show resilience
- Lennar (LEN): Home sales sluggish but stable. Analysts expect moderate declines in housing starts through 2026.
- Darden (DRI): Restaurant sales surprisingly strong. Olive Garden and Longhorn Steakhouse posted same-store sales up nearly 7%.
- Kroger (KR): Same-store sales rose 3.2%, with margins steady. Company reinvesting gains to maintain competitive pricing.