U.S. stock futures were lower before Monday's open, with the Dow, S&P 500, and Nasdaq all pointing down. The reason was not hard to find. Fresh drone incidents in the Middle East, including a reported strike near a nuclear facility in the United Arab Emirates and intercepted drones over Saudi Arabia, have kept the region on edge. Donald Trump warned Iran that time was running out to end the conflict.

Oil remains the market's most obvious pressure point. Brent crude is hovering near $110 a barrel, while West Texas Intermediate is around $101. The 10-year Treasury yield briefly climbed to 4.631% earlier Monday, its highest level since February 2025, before easing a little. Higher yields spill into stocks, especially growth and technology shares, where valuations depend heavily on future profits. When borrowing costs rise, those future profits look less attractive today.

The coming week will test whether Wall Street's recent optimism can survive this new pressure. Nvidia reports on Wednesday, and the stakes are enormous. The company has become the face of the AI boom, and its shares have climbed sharply from their March low. The broader semiconductor sector has also surged this year, helped by strong demand for AI chips. That enthusiasm helped push the S&P 500 and Nasdaq to record highs recently, even as oil and inflation worries were building in the background. Now investors are asking whether AI optimism can keep carrying the market if inflation fears are back in charge.

Walmart and The Home Depot will also report this week, giving investors a look at the American consumer. Higher fuel costs and sticky inflation can quietly squeeze household budgets. Walmart, in particular, is a useful barometer: when Americans are feeling pinched, they tend to show it in the checkout aisle before they show it in an economic model.

The macro calendar is lighter. The main data event is Thursday's PMI readings from major economies. Today's U.S. housing market index is expected to remain unchanged at 34. The minutes from the Fed's latest meeting are due Wednesday, and they may draw more attention than usual because the Fed itself is changing hands.

Kevin Warsh is set to take over as Fed chair after Jerome Powell's term ended Friday. He has not yet been sworn in, but Senate confirmation is done, and he is expected to lead the June meeting. This is not exactly a gentle first week. Warsh arrives with bond yields climbing, oil prices high, and markets beginning to price in the possibility of another rate hike. Traders now see more than a 40% chance that the Fed raises rates in December, after hotter-than-expected inflation data last week.

The politics are unavoidable. Trump chose Warsh in part because he wanted a Fed chair more inclined to cut rates. Warsh had argued that AI-driven productivity gains could justify lower borrowing costs. That idea may still have appeal, but the fact is that wars can raise oil prices faster than productivity gains lower inflation. So Warsh may soon face the same trap that caught Powell. A president wants easier money, the market wants reassurance, and inflation wants attention. The Fed chair gets blamed by everyone.

There is a larger issue here. For much of this year, investors were willing to look past geopolitical risk because AI was doing so much of the market's emotional labor. The S&P 500 still managed a seventh straight weekly gain last week, bringing its 2026 advance to more than 8%. Europe, with less of an AI tailwind, had a weaker week and is up only about 2.5% this year. But Friday's bond-market selloff showed the limits of that optimism. Markets can live with expensive stocks if rates are stable. They can live with higher energy prices if inflation is cooling. They can even live with geopolitical risk if it feels contained. What they do not like is all three arriving together.

Asia's Monday session showed the same unease. China added to the caution after April industrial production and retail sales disappointed, despite earlier indicators that had encouraged investors. Meanwhile, the summit between Trump and Xi Jinping produced no major commitments that markets could celebrate. Taiwan also reaffirmed its independence from Beijing after Trump described a $14 billion arms sale as a bargaining chip with China: a comment unlikely to be framed in Taipei as a masterpiece of reassurance.

Today's economic highlights:

Today's agenda includes: in China, the House Price Index, Industrial Production, Retail Sales, and Fixed Asset Investment will be released; In Switzerland, the GDP Growth Rate QoQ Flash will be announced; In Italy, the Balance of Trade will be revealed; In the United States, the NAHB Housing Market Index and Net Long-term TIC Flows will be monitored. See the full calendar here.

  • Dollar index: 99.035
  • Gold: $4,562
  • Crude Oil (BRENT): $107.51 (WTI) $99.04
  • United States 10 years: 4.57%
  • BITCOIN: $77,480

In corporate news:

  • OpenAI and Anthropic reportedly now capture about 89% of annualized revenue among 34 leading generative AI startups, widening their lead over rivals.
  • Regeneron Pharmaceuticals said a phase 3 melanoma trial of fianlimab plus cemiplimab failed to meet its primary endpoint, sending shares sharply lower premarket.
  • Intel was highlighted by Donald Trump, who said the U.S. government "should have asked for more" than the 10% stake it took in the chipmaker.
  • United Therapeutics said its phase 3 ralinepag trial in pulmonary arterial hypertension met its primary endpoint and plans to file for FDA approval in the second half of 2026.
  • Tesla reportedly raised U.S. prices for several Model Y variants by $500 to $1,000.
  • Bio-Rad Laboratories attracted an investment from activist Elliott Investment Management, which plans to push for improved performance.
  • Arm is reportedly under U.S. antitrust scrutiny over its semiconductor licensing practices as it expands into chipmaking.
  • Publicis Groupe agreed to acquire LiveRamp in an all-cash deal valued at about $2.17 billion. LiveRamp also reported higher fiscal fourth-quarter non-GAAP earnings and revenue.
  • Glenstone is considering a firm cash offer for Alternative Income REIT.
  • NextEra and Dominion Energy are reportedly in talks to create a $400 billion U.S. utility giant (according to the FT), with an offer of $76 per Dominion share (according to Bloomberg).
  • U.S. asset managers have released their Q1 2026 portfolio adjustments. Among them, Pershing Square (Bill Ackman) reports having sold Alphabet in favor of Microsoft.
  • The DOJ is investigating the valuations of a BlackRock private credit fund, Bloomberg has learned.
  • KKR is considering selling private club operator The Bay Club, according to Reuters.

Analyst Recommendations:

  • Applied Materials, Inc.: Morgan Stanley downgrades to market weight from overweight with a target price of USD 502.
  • Automatic Data Processing, Inc.: Wells Fargo upgrades to market weight from underweight with a target price of USD 214.
  • Ball Corporation: JP Morgan upgrades to overweight from neutral with a target price of USD 60.
  • Crown Holdings, Inc.: JP Morgan upgrades to overweight from neutral with a target price of USD 107.
  • Deckers Outdoor Corporation: Piper Sandler & Co upgrades to neutral from underweight and raises the target price from USD 95 to USD 100.
  • Invitation Homes Inc.: Raymond James upgrades to outperform from market perform with a target price of USD 32.
  • Lam Research Corporation: Morgan Stanley upgrades to overweight from equalwt and raises the target price from USD 293 to USD 331.
  • Regeneron Pharmaceuticals, Inc.: Citi downgrades to neutral from buy and reduces the target price from USD 900 to USD 700.
  • V.f. Corporation: Williams Trading LLC upgrades to buy from sell and raises the target price from USD 14 to USD 19.
  • Westlake Corporation: JP Morgan upgrades to neutral from underweight with a target price of USD 90
  • Ciena Corporation: Citi maintains its buy recommendation and raises the target price from USD 345 to USD 658.
  • Crowdstrike Holdings, Inc.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 525 to USD 700.
  • Echostar Corporation: TD Cowen maintains its buy recommendation and raises the target price from USD 129 to USD 155.
  • Guidewire Software, Inc.: Oppenheimer maintains its outperform recommendation and reduces the target price from USD 250 to USD 180.
  • The Home Depot, Inc.: Oppenheimer maintains its market perform recommendation and reduces the target price from USD 405 to USD 310.
  • Zoetis Inc.: Citi maintains its buy recommendation and reduces the target price from USD 145 to USD 112.