U.S. Markets Daily Wrap: Fed in Focus Amid Geopolitical Tensions and Mixed Economic Signals

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Index Update:  U.S. markets remained cautious as investors awaited the Federal Reserve’s policy decision, with focus on future guidance amid tariff uncertainties and escalating geopolitical tensions. All major indexes closed lower in the prior session, with the Dow Jones down 0.7%, the S&P 500 falling 0.84%, and the Nasdaq losing 0.91%. Most S&P 500 sectors declined, except energy, which gained on higher oil prices. Adding to market jitters, President Trump intensified tensions with Iran by demanding its “unconditional surrender” and threatening action against Supreme Leader Khamenei.

Market Movers:  On Tuesday, the top gainers were CERo Therapeutics Holdings, Inc (+188.73%), followed by Eyenovia, Inc (+134.68%). On the contrary Sunrun Inc (-40.04%) and SolarEdge Technologies, Inc (- 33.44%) declined the most the same day.

Commodities Update:  Oil prices hovered near multi-month highs as the Iran-Israel conflict continued to raise concerns over potential supply disruptions. WTI crude traded close to USD 75 per barrel and Brent near USD 76, amid fears of a wider regional escalation after Israel’s strikes near Tehran and speculation about possible U.S. involvement. Despite the tensions, Iran’s crude-exporting infrastructure remains intact, and the market has stayed relatively stable thanks to ample global supply, including rising OPEC+ output and record U.S. production. Meanwhile, U.S. data indicated a significant drop in crude inventories, hinting at strong demand.

Gold dipped as a stronger dollar outweighed safe-haven buying driven by geopolitical tensions, while silver surged past USD 37 per ounce, its highest since 2012, supported by robust industrial demand and ongoing supply deficits. Investors are focused on the Federal Reserve’s upcoming policy decision, with rates expected to remain steady but markets eager for signals on future moves amid ongoing global uncertainties.

Macro Update:  U.S. mortgage applications fell 2.6% from the previous week, partially reversing the prior 12.5% jump. This decline came despite lower benchmark mortgage rates, with 30-year fixed rates hitting a one-month low as economic uncertainty weighed on mortgage-backed securities yields. Applications for new home purchases dropped 3%, while refinancing applications, more sensitive to rate changes, slipped 2.1%.

The Federal Reserve is expected to keep interest rates unchanged for a fourth straight meeting as it assesses the economic effects of President Trump’s recent policies, including new tariffs. The meeting will feature updated economic projections, with markets watching for any revision to the Fed’s outlook on rate cuts. Inflation remains moderate, and unemployment has been stable, though job growth has slowed.

Bonds Commentary:  The yield on the U.S. 10-year Treasury hovered around 4.4% as investors awaited the Federal Reserve’s policy decision, with attention on its guidance amid tariff uncertainty and rising geopolitical tensions. Treasury yields had declined earlier on safe-haven demand following heightened Israel-Iran conflict and President Trump’s threats toward Iran. Meanwhile, weaker-than-expected retail sales data was offset by strong wage growth, which continued to support consumer spending. Markets are also watching upcoming housing data and jobless claims ahead of the market holiday.

Futures Update:  U.S. stock futures steadied after initially gaining, as tensions in the Middle East escalated following remarks from Iran’s Supreme Leader. Investors remained cautious ahead of the Federal Reserve’s upcoming interest rate decision. In the previous session, Wall Street’s main indexes closed lower, pressured by ongoing conflict between Israel and Iran and disappointing retail sales data. The S&P 500 fell 0.8%, the Nasdaq Composite lost 0.9%, and the Dow Jones Industrial Average slipped 0.7%.

Stocks experienced a significant decline during Tuesday's trading session, erasing some of the gains from the previous rebound. The S&P 500 fell by 50.39 points, or 0.84%, closing at 5,982.73. From a technical analysis standpoint, the index is currently near a convergence point and encountering resistance from a trendline, implying a potential period of consolidation in the near term, as previously noted. However, the index remains above its key exponential moving averages, which supports a cautiously optimistic outlook and suggests these levels could act as near-term support. The main support level is around 5,888, with resistance expected near 6,066.