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Over the weekend, the U.S. got directly involved in the Israel-Iran conflict, destroying nuclear facilities at Fordo, Natanz, and Isfahan. It was a surprise attack; only the market doesn't look all that surprised or, more to the point, all that bothered by the development.
The S&P 500 futures are up seven points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 32 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are up 12 points and are trading fractionally above fair value.
The basis for this poised response is the recognition that oil prices have not spiked on the news (WTI -0.4% to $73.62/bbl), Iran has not retaliated against the U.S., and there hasn't been a regional escalation of the conflict on account of the strikes.
That's not to say these things couldn't happen in the (near) future, but market participants are not operating with a belief that they will happen. There might be some unease in the market as a result of the U.S.-led bombings, but there isn't a fear of any meaningful economic fallout as a result of the U.S.-led bombings.
There has been some safe-haven action in the Treasury and forex markets. The 2-yr note yield is down three basis points to 3.88%, the 10-yr note yield is down four basis points to 4.34%, and the U.S. Dollar Index is up 0.7% to 99.36.
Stocks, though, continue to trade with an air of resilience in front of a big week that might see the Senate bring its version of the reconciliation bill to a vote and will see Fed Chair Powell give his semi-annual monetary policy report to Congress on Tuesday and Wednesday.
Additionally, there will be another round of Treasury auctions ($69 billon 2-yr, $70 billion 5-yr, and $44 billon 7-yr) and a slate of economic data that starts today with the preliminary S&P Global U.S. Manufacturing PMI and Services PMI reports for June at 9:45 a.m. ET today, followed by the May Existing Home Sales Report at 10:00 a.m. ET, and ends Friday with the May Personal Income and Spending Report and final June reading for the University of Michigan Consumer Sentiment Index.
