Stocks retreated deeper on Tuesday as the latest developments in the Israel-Iran conflict dashed earlier hopes that there would be a swift ceasefire agreement. Investors also digested fresh U.S. retail sales data ahead of the Federal Reserve's policy decision on Wednesday.
The Dow Jones Industrial Average
President Donald Trump stoked regional war escalation fears overnight, writing in a post on Truth Social that "everyone should immediately evacuate Tehran. The comments came after Trump left the G7 summit in Canada early on Monday.
On Tuesday, Trump told reporters on Air Force One that he is looking for "an end. A real end, not a ceasefire, an end," but failed to provide more details on what that could look like. The president has also reiterated his stance that Iran can never be allowed to have a nuclear weapon. Trump later threatened Iran's leader in a series of Truth Social posts on Tuesday, calling for "UNCONDITIONAL SURRENDER!," before meeting with his national security team in the White House Situation Room in the afternoon.
Oil prices spiked again on Tuesday, reversing from Monday's pullback from earlier ceasefire optimism. International benchmark Brent crude futures climbed 1.6% to over $74 a barrel and U.S. West Texas Intermediate crude was up nearly 2% to $73 on Tuesday.
On the economic side, U.S. retail sales came in weaker-than-expected for May, the Commerce Department reported Tuesday, impacted by lingering unease over the future of the U.S. economy. Headline sales declined 0.9% for the month, falling below the 0.6% decline expected by Dow Jones consensus and following April's 0.1% loss. On an annual basis, sales rose 3.3%.
Excluding autos, sales fell by a more-than-expected 0.3% last month.
"Americans bought cars in March ahead of tariffs and stayed away from car dealerships in May. Families are wary of higher prices and are being a lot more selective with there they spend their month," said Heather Long, chief economist at Navy Federal Credit Union, following the report, adding that consumers "aren't eager to buy" right now unless they see a good deal.
Homebuilder sentiment also declined in June as high mortgage rates and a perpetually nervous consumer continue to weigh on the housing market. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index fell 2 points from May to 32; any reading below 50 is considered negative. The index recorded was at 43 for the same period a year ago.
Beneath the headline, current sales conditions decreased 2 points to 35, sales expectations for the next six months fell 2 points to 40, and buyer traffic dropped 2 points to 23 -- its lowest reading in about two years.
"Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines for resales in a growing number of markets," said Robert Dietz, chief economists at the NAHB, in a statement. "Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025."
This data comes ahead of the Federal Reserve's monetary policy decision due out Wednesday afternoon, where central bankers are widely expected to hold interest rates at their current range of 4.25% to 4.5%, according to CME Group's FedWatch tool.
