Stress tests clear banks as home sales weaken and equity targets climb

The Federal Reserve released its annual stress test results confirming that large U.S. banks remain well capitalized and capable of lending through a severe recession scenario. The exercise, which models unemployment spikes and market dislocations, showed capital buffers intact across the largest institutions. This matters less for confidence—markets already priced in resilience—and more for buyback and dividend capacity in the second half.

J.P. Morgan raised its year-end S&P 500 target to 7,800, joining a late-cycle parade of upward revisions from sell-side strategists. The move reflects earnings optimism and multiple expansion, not a shift in macro forecast. It also reflects the pain of being underweight equities in a melt-up. Analyst capitulation is not a contrarian signal by itself, but it does tell you where the pressure sits.

Meanwhile, new single-family home sales posted their second consecutive monthly decline, per Census Bureau data. The drop extends a pattern visible since mortgage rates stopped falling and builders stopped cutting prices. Sales volumes are still above the 2023 trough, but the rate of change has reversed. Housing has been one of the stickier pockets of consumer demand; if it softens materially, the Fed's stress scenarios start to look less hypothetical.

Gold fell to a two-week low as rate-hike bets strengthened the dollar. The move tracks rising real yields and a Treasury curve that has stopped easing. Gold had rallied on central bank buying and geopolitical hedging, but its correlation to real rates reasserts itself when DXY moves. If the Fed holds or hikes again, the dollar bid continues and gold gives back more.

European equities traded flat as investors weighed US-Iran diplomacy that could ease oil risk premium. Rheinmetall shares slid on profit-taking after a long remilitarization run. Separately, UK logistics landlord Segro rejected a £12.6 billion takeover bid from U.S. rival Prologis, sending Segro shares up 18 percent. Prologis is urging Segro shareholders to force engagement, a sign that industrial real estate remains one of the few sectors where strategic buyers see value at scale.