The first full week after the Fed’s hawkish turn brought the test investors feared. May PCE inflation, the Fed’s preferred gauge, climbed to 4.1% year-over-year, its highest since April 2023, and triggered a sharp rotation within a broadly lower market. The S&P 500 lost 1.9% over a five-day losing streak and large-cap growth fell 3.4%, as the 10-year Treasury yield eased to about 4.38%. Micron beat strongly on AI demand and jumped after hours, but the chip complex still sold off, and emerging markets fell 4.4%. The Iran agreement frayed over control of the Strait of Hormuz before both sides agreed on June 27 to halt attacks and resume talks.

In a week shortened by the Juneteenth holiday, Kevin Warsh chaired his first Federal Reserve meeting and set a markedly more hawkish tone. The Fed held rates at 3.50% to 3.75%, but its updated projections removed the rate cut it had penciled in for 2026 and now point to a possible hike, with nine of eighteen officials projecting an increase this year.

The week of June 8 delivered two events for the history books within 48 hours of each other. On Friday, June 12, SpaceX completed the largest initial public offering ever, pricing at $135 per share and closing its first session at $161.11, up more than 19% and lifting the company’s value above $2 trillion, the sixth-largest public company in the United States. Then on Sunday, June 14, President Trump and Pakistani Prime Minister Shehbaz Sharif announced that the United States and Iran had reached an agreement to end their war, reopen the Strait of Hormuz to toll-free shipping, and lift the U.S. naval blockade. In between, the May Consumer Price Index showed headline inflation topping 4% for the first time in three years, though a softer core reading and the prospect of falling energy prices helped markets recover from a midweek slide to finish higher. Crude oil fell roughly 6% on the week toward $85 per barrel as the peace framework took shape. Beneath a 0.7% gain in the S&P 500, the week brought a sharp rotation into value and small caps, with the Russell 2000 surging 3.9% while large-cap growth slipped. All eyes now turn to the Federal Reserve’s June 16-17 meeting, Kevin Warsh’s first as chairman, against an inflation backdrop that shifted dramatically in the final 72 hours.