Markets face a key inflection point this week, as tensions in the fragile truce between Washington and Tehran flare and investors prepare for the first of three megacap IPOs that will test investor exuberance for a tech and AI rally that has defined markets for much of the year.

The U.S. and Iran traded fire overnight, amid reprisal attacks linked to the downing of an American Apache helicopter over the Strait of Hormuz, in the biggest skirmishes since a shaky cease-fire was agreed to in mid-April.

President Donald Trump continues to insist a deal remains in reach that will end the war, which has now been going for more than 100 days -- but markets are split on the outcome.

Global crude prices are holding near the lowest levels since April, and haven't really spiked in any meaningful way since news of this week's attacks, although, on the day of the crucial May inflation reading, Treasury yields continue to edge higher.

Stocks, however, are looking rather suspect, falling close to last Friday's close in a tech-led selloff on Tuesday that keeps the S&P 500 in negative territory for the month and hovering near the lowest levels since May 19. More losses are expected on Wednesday.

A good portion of that decline is likely linked to the Thursday pricing of SpaceX's IPO and its first day of trading on Friday, which is expected to sap billions from the tech rally to make room for Elon Musk's $1.8 trillion venture.

How markets fare after that is anyone's guess, especially if the military tensions in the Gulf region stoke another leg higher in crude prices, spark a Treasury bond selloff that lifts yields higher, and saps risk appetite into the final days of a strong second quarter.

However it plays out, markets are likely to be a lot more difficult to navigate over the coming weeks.

-- Martin Baccardax

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Big Banks Face Pressure to Disclose Plan on AI Risks

Congressional Democrats are calling on the largest U.S. banks to say how they plan to handle the risks posed by fast-changing artificial intelligence capabilities, including how they plan to guard against potential cyber threats from Anthropic's Mythos and other sophisticated models.

   -- Rep. Maxine Waters of California, the top Democrat on the House Financial 
      Services Committee, requested the details in a letter to the CEOs of 
      Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America, Wells Fargo, 
      and Citigroup. She's requesting responses by July 3. 
 
   -- The congresswoman's request followed letters this month from Sen. 
      Elizabeth Warren of Massachusetts to Sen. Tim Scott (R., S.C.) and 
      Treasury Secretary Scott Bessent about how regulators and lawmakers were 
      handling cybersecurity threats posed by AI. 
 
   -- Warren, the top Democrat on the Senate Banking, Housing, and Urban 
      Affairs Committee, criticized the Trump administration's increasingly 
      hands-off approach to bank supervision -- which banks have lobbied for in 
      recent years -- at a time when AI models are growing more powerful. 
 
   -- On Tuesday, Anthropic released a "Mythos-class" model it says is safe for 
      general use. It also released a separate capability called Claude Mythos 
      5 that it will initially deploy through a partnership called Project 
      Glasswing, a group that includes blue-chip companies such as JPMorgan, 
      Apple, and Microsoft. 

What's Next: Anthropic added that it has launched Fable 5 with safeguards to ensure it can handle cybersecurity risks. Mythos 5 will initially be deployed through Project Glasswing in collaboration with the U.S. government, as an upgrade to Claude Mythos Preview.

-- Rebecca Ungarino and Angela Palumbo

Rivian's Newer Cheaper EV Model Era is Beginning

Rivian has started its Model 3 era, tantalizing investors with the possibility of Tesla-like returns in the coming years. The new model is supposed to play a big role in Rivian's sales growth plans with a lower-priced model.

   -- The electric-vehicle maker said its R2 SUV has arrived, a 
      second-generation lower priced group of EVs following the rollout of the 
      R1S and R1T five years ago. The announcement on social media likely 
      refers to initial deliveries. It invites people to make a reservation. 
 
   -- The R1T is a more expensive, luxury offering, which limits market size. 
      Car companies like to launch higher-priced, lower-volume vehicles first, 
      while they work out production kinks and build demand. Tesla first sold 
      the Model S luxury sedan in 2012 and followed with the cheaper Model 3 in 
      2017. 
 
   -- Lower-price cars are critical to sales growth, which is why the R2 is 
      such a big deal for the company. Rivian faces a critical period of 
      execution, according to Barclays analyst Dan Levy. Along with the new EV, 
      Rivian is working on self-driving technology and battery storage -- just 
      like Tesla. 
 
   -- Rivian delivered about 42,000 cars in 2025. Wall Street sees that jumping 
      to about 220,000 by 2028, helped by the R2, which starts at about 
      $46,000. An R1S starts at about $77,000. A Tesla Model 3 starts at about 
      $36,000. All the cars, of course, have different features and trims that 
      change the price level. 

What's Next: More cars are needed to generate profits in the capital-intensive auto business. Tesla didn't produce consistent profit until it was making roughly 400,000 cars a year. Wall Street doesn't see Rivian producing a full-year profit until 2030, when sales are expected to top 420,000 units.

-- Al Root

Warner Bros. Stock Offers an Unusual Takeover Arbitrage Spread

Warner Bros. Discovery's stock is giving traders an unusually high return for a takeover arbitrage situation, hitting a three-month low this past week after hovering around $27 a share for a month after a February deal to merge into Paramount Skydance at $31 a share.

   -- At its current price, the stock has a 17% return to the deal price, an 
      unusually wide spread for a takeover, considering a targeted third 
      quarter closing date. Many takeover arbitrage situations offer spreads of 
      5% to 10% with longer periods until expected closing. 
 
   -- The shorter the period until closing, the more attractive a takeover 
      arbitrage situation. There are reports that state attorneys general are 
      prepared to challenge the merger on the grounds that Paramount would have 
      too much power with its control over Warner Bros.' TV and movie 
      businesses. 
 
   -- Paramount apparently wants to avoid a legal challenge at the state level. 
      The entertainment company, Bloomberg reported on Monday, has given a list 
      of concessions to the state attorneys general, including California's Rob 
      Bonta. Paramount didn't respond to a request for comment. 
 
   -- Workers and their unions in Hollywood -- within the entertainment 
      industry more broadly -- are worried that the Paramount/Warner deal will 
      take jobs. The merger isn't expected to face a federal challenge. The 
      U.K. antitrust authority is looking into the transaction, Bloomberg 
      reported on Monday. 

What's Next: Paramount is confident enough of closing before Sept. 30 that it will give Warner Bros. shareholders a 25 cent per-share bonus, or ticking fee, if the deal doesn't close before then -- with additional quarterly ticking fees of 25 cents a share until closing.

-- Andrew Bary

DraftKings Sees Prediction Market Offering Pick Up. It's Early.

Sports-betting site operator DraftKings is starting to see the upside to its investment in prediction markets after taking a beating by the rising threat of firms like Kalshi and Polymarket, which offer federally-regulated event contracts that closely resemble sports bets but are available across the country.

   -- While not every state allows sports betting, prediction markets are 
      available to anyone over the age of 18 without being subject to state 
      gambling taxes. DraftKings says annualized consumer trading volumes on 
      its predictions platform rose 24% from April, to $1.3 billion, and 
      annualized trading volume rose 34%. 
 
   -- The filing notes that those are preliminary numbers based on internal 
      data, and subject to change. To compete with the upstarts, DraftKings and 
      rival Flutter-owned FanDuel each introduced prediction markets. Each firm 
      had to acquire a regulated futures exchange and develop a brand new 
      offering. 
 
   -- Doing so weighed on earnings, and the investment isn't set to pay off for 
      a while. When it reported first quarter earnings last month, Flutter said 
      that revenue from FanDuel Predicts were "non-material," and the company 
      didn't include any prediction market revenue in its outlook for the 
      remainder of the year. 
 
   -- But the sportsbooks have years of experience marketing sports betting to 
      new customers and an opportunity to onboard customers in populous states 
      that haven't legalized traditional sports betting, such as Texas and 
      California. Polymarket has a data-sharing partnership with Dow Jones, 
      Barron's publisher. 

What's Next: TD Cowen analysts see prediction markets as an early stage opportunity that expands the addressable market. DraftKings has some catching up to do. Kalshi saw $10.4 billion in sports trading volume in May.

-- Nick Devor

Super Micro Sells Stock as AI Boom Drains Cash

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