New York Stock Exchange, focusing on the possibility of the US and Iran restarting ceasefire negotiations

This week, the New York stock market is expected to be shaped by the potential for the United States and Iran to restart ceasefire negotiations, as well as the resilience of the U.S. economy indicated by the April employment indicators.

The first variable that market participants are focusing on is the situation in the Middle East. Last weekend, Iran conveyed a new ceasefire-negotiation proposal to the United States through Pakistan, using Pakistan as a mediator. According to some reports, the proposal includes advancing the ceasefire issue in parallel with nuclear negotiations. Previously, Iran had proposed stopping the war first, fully opening the Strait of Hormuz, and then moving on to nuclear talks, but U.S. President Donald Trump did not accept the proposal, causing the negotiation framework to be reshaped again. Although the United States is reviewing the new proposal, it remains uncertain whether it will actually accept it. On May 1, President Trump emphasized the effectiveness of military pressure on Iran and reiterated that he would not rule out a prolonged war stance until satisfactory conditions are reached.

At the same time, Iran’s economy is rapidly destabilizing, which is seen as a background factor that could accelerate the pace of negotiations. Since the start of hostilities, prices and the exchange rate in Iran have surged sharply, and economic instability has worsened further. In particular, the rial’s value fell by about 15% last week, and prices reportedly skyrocketed to about 7 times year-on-year. With the economic shock further intensifying after the full launch of the U.S. maritime blockade, the market believes Iran may be more actively heading to the negotiating table to prevent the situation from deteriorating further. If both sides enter the second round of ceasefire negotiations quickly, it could have an immediate impact on international oil prices and investor sentiment toward risk assets.

In terms of internal U.S. variables, the April non-farm employment data released on May 8 is crucial. If employment figures are firmer than expected, even if recent price pressures remain, it may slightly ease concerns about a sharp slowdown in the U.S. economy. Conversely, if employment growth slows significantly, the stagflation concern—where high prices coexist with economic slowdown—may intensify again. According to FactSet, a financial information company, April non-farm payrolls are expected to add 50,000 jobs, a sharp drop from 178,000 in March. The unemployment rate is expected to stay at a relatively stable level of 4.3%. However, many analysts believe that even if strong employment data appears, it is still difficult to immediately raise expectations for rate cuts. This is because the recent signals released by the Federal Open Market Committee (the U.S. central bank’s monetary policy meeting) have been weaker in favor of rate cuts. Based on the FedWatch tool from the Chicago Mercantile Exchange, the probability that the federal funds rate futures market expects the benchmark rate to remain unchanged through the end of this December is 77.7%. The probability of a 0.25 percentage-point rate hike is 9.1%, and the probability of a rate cut of the same magnitude is 12.3%. This suggests that, at least in the short term, the actual direction of prices and the economy may have a greater impact on the stock market than the interest rate itself.

Attention to seasonal factors is also heating up again. Typically in May, Wall Street repeats the adage “Sell in May and go away,” but judging solely by the trends from the past 10 years, it is hard to say that this necessarily leads to a bear market. According to analysis from JPMorgan’s trading division, the S&P 500 has risen on average 1.5% in May over the past 10 years, 1.9% in June, and 3.4% in July. Some expect that after a spring correction, the rebound trend could continue through the end of the year. This week, among large technology stocks, there are not many additional earnings releases from the so-called “Magnificent Seven,” but the performance of Palantir and AMD—companies that can be used to gauge the level of enthusiasm for artificial intelligence and semiconductor investments—is seen as a matter worth watching. In addition, a series of data releases are scheduled, including March factory orders on May 4, March trade balance and the April Institute for Supply Management (ISM) services Purchasing Managers’ Index on May 5, March new home sales and the JOLTS job openings report, ADP employment figures on May 6, weekly initial jobless claims and productivity indicators on May 7, and the non-farm employment report and the University of Michigan consumer sentiment index on May 8. This series of developments is likely to usher the future New York stock market into a phase in which investors weigh whether geopolitical tensions are easing against the extent of the U.S. economic slowdown.