WEEKLY MARKET RECAP – June 18, 2026

Most major U.S. stock indexes finished the holiday-shortened week in positive territory, supported by improving investor sentiment after the United States and Iran signed a memorandum of understanding that could pave the way for reopening the Strait of Hormuz. The development helped ease energy market concerns and pushed oil prices lower. Among the major benchmarks, the NASDAQ led with a 2.43% gain, followed by the Russell 2000, up 1.21%, and the S&P 500, which advanced 0.93%. U.S. markets were closed Friday in observance of Juneteenth.

As widely anticipated, the Federal Reserve left its benchmark interest rate unchanged at 3.50% to 3.75%. However, the central bank’s updated economic projections and Fed Chair Kevin Warsh’s first post-meeting press conference were viewed as more hawkish than expected, sparking a sell-off in equities and a rise in short-term Treasury yields on Wednesday afternoon.

The Fed’s revised projections showed policymakers shifting toward a tighter policy outlook. The median forecast now points to modest rate increases by year-end, a notable departure from March’s expectation of rate cuts. Nine of the 18 officials projected at least one rate hike in 2026, while only one anticipated a rate reduction. Inflation forecasts were also revised higher, with headline Personal Consumption Expenditures (PCE) inflation expected to reach 3.6% in 2026 and core PCE inflation projected at 3.3%. Warsh did not submit his own economic projections.

The Fed’s policy statement was shorter than recent versions and offered limited guidance on future moves. During his press conference, Warsh emphasized that forward guidance is less useful in the current environment and reaffirmed the central bank’s commitment to restoring price stability.

Economic data released during the week painted a mixed picture. Retail sales rose 0.9% in May, exceeding expectations and accelerating from April’s revised 0.4% gain. Excluding automobiles, sales increased 0.8%, while control group sales, which factor directly into GDP calculations, climbed 0.7%. The strength was broad-based, with only electronics, appliance retailers, and restaurants reporting declines.

Housing data remained more subdued, reflecting ongoing affordability challenges and elevated borrowing costs. The National Association of Home Builders reported that its housing market index unexpectedly fell to 35 in June as builders grappled with rising material costs and higher mortgage rates. Meanwhile, housing starts dropped 15.4% in May to an annualized pace of 1.177 million, well below expectations. One bright spot came from pending home sales, which increased 4.8% from a year earlier, marking the fastest annual growth since November 2024.

In fixed income markets, Treasury prices generally declined, particularly after the Fed meeting, pushing short-term yields sharply higher. The two-year Treasury yield reached its highest level in more than a year. Investment-grade corporate bonds also posted negative returns and slightly underperformed Treasuries, while high-yield bonds outperformed amid the week’s more constructive risk appetite.