Major indices are retreating from record highs as oil prices edge higher following some further Iranian strikes in the region, namely on Kuwait International Airport.

The Iranian tensions, and upward pressure on oil, are moving Energy (XLE) into the lead, followed by more defensive sectors of Consumer Staples (XLP), Healthcare (XLV), and Real Estate (XLRE). On the other end of the list, Technology (XLK) is seeing some profit-taking action, with software leading the sector lower following adverse earnings reactions to Palo Alto Networks (PANW) and GitLab (GTLB).

Economic Data

May’s ISM Services PMI rose to 54.5 from 53.6 and beat forecasts of 53.8. The report saw the fastest expansion in new orders, business activity, and inventories. Employment contracted for the third month in a row with respondents noting hiring freezes. Prices hit their highest level since August 2022, largely due to energy prices.

Factory Orders in April rose 4.8% M/M, accelerating from 1.8% in March and above the anticipated 4.6% rise. Notably, durable goods saw an 8% increase, while non-durable goods saw a 1.4% rise. Additionally, transportation rose 21.6%, driven by a 165% increase in non-defense aircraft, while fabricated metals advanced 3.5% and primary metals expanded 2%. On the other hand, computers and electronics contracted slightly, falling 0.7%.