DJIA futures fell after the weekend but recovered on Monday, moving from lows above 49,000 to near Friday’s close by mid-afternoon. The S&P 500 and Nasdaq Composite also rebounded but stayed well below last week’s record highs, after Friday’s pullback linked to higher long-term bond yields.
Memory chip shares led early declines, with Seagate down 7% after its CEO said new factories would “take too long” to come online. Micron fell 2%, and the Nasdaq-100 dropped 1.5% on Friday, its worst one-day fall since late March.
Bond Yields And Macro Backdrop
Oil prices rose as US-Iran tensions continued, with WTI up 0.5% above $105 a barrel and Brent up 0.5% near $109. The 30-year US Treasury yield hit its highest level in around a year on Friday and was largely steady on Monday, while the UK 30-year gilt was at levels last seen in the late 1990s.
On Sunday, President Donald Trump warned Iran had to “get moving” or “there won’t be anything left”, while Axios reported the US still viewed Iran’s updated proposal as inadequate. This kept a risk premium around the Strait of Hormuz in place.
US data is light, with Thursday’s flash PMIs in focus: Manufacturing 53.8 vs 54.5 prior, and Services 51.3 vs 51 prior. Fed speaker events include Christopher Waller on Tuesday and Friday, FOMC minutes on Wednesday, and the University of Michigan survey on Friday.
Looking back to this time in May 2025, we saw the market get spooked by a global spike in long-end bond yields which capped the S&P 500 and Nasdaq. Today, with the 10-year Treasury yield holding stubbornly above 4.4%, this theme of rate pressure remains a major headwind for growth stocks. Traders should consider hedging against similar yield-driven valuation pressure, perhaps using options on the QQQ.
We remember how memory chip stocks like Micron got hit in May 2025 over worries they couldn’t build new factories fast enough. Fast forward to today, and the AI-driven demand for high-bandwidth memory has sent Micron’s stock up over 90% in the last year alone. Any significant pullbacks in leading AI-related chip stocks might be viewed as buying opportunities for call options, betting the supply-demand imbalance continues.
Energy And Geopolitical Hedging
A year ago, we were watching WTI crude trade above $105 a barrel because of a tense standoff in the Middle East. Today, oil is much calmer, hovering near $80, which has helped ease some inflation fears. This lower price suggests that a sudden geopolitical flare-up could cause a significant shock, making long-dated call options on energy ETFs like XLE a potentially cheap hedge.
In May 2025, hot inflation data pushed any hope of Fed rate cuts far into the future, focusing all eyes on the PMI data for signs of a slowdown. We find ourselves in a similar spot now, with the latest Composite PMI coming in at 51.3 and the Fed signaling rates will stay higher for longer. Derivative traders should be watching inflation expectations in the upcoming University of Michigan survey for any surprises that could shift the Fed’s timeline.
