Market Overview
The S&P 500 gained 0.5% on Wednesday as investors awaited the Federal Reserve’s interest rate decision while monitoring ongoing tensions in the Middle East. The Dow Jones Industrial Average climbed 258 points, or 0.6%, while the Nasdaq Composite advanced 0.6%.
Markets are rebounding from Tuesday’s losses, which came as the Israel-Iran conflict intensified. The conflict has now entered its sixth day, with Iran’s Supreme Leader Ayatollah Ali Khamenei warning that the U.S. would face “irreparable damage” if it enters the conflict directly.
Fed Decision in Focus
All eyes are on the Federal Reserve’s monetary policy announcement scheduled for 2 p.m. ET today. The central bank is widely expected to maintain interest rates at the current 4.25%-4.5% range.
Investors will be closely analyzing Fed Chair Jerome Powell’s post-meeting comments and the updated “dot plot” showing policymakers’ rate expectations. Markets are currently pricing in about 46 basis points of rate cuts by the end of 2025, with a 56% chance of a 25-basis-point cut in September, according to CME Group’s FedWatch tool.
“A lot has happened since their last meeting in early May… given that uncertainty and the potential for fresh inflationary spikes, they’re widely expected to keep rates on hold again,” noted Jim Reid, global head of macro and thematic research at Deutsche Bank.
Geopolitical Tensions
The ongoing Israel-Iran conflict continues to influence market sentiment. President Donald Trump has taken a confrontational stance, posting on his Truth Social platform that “our patience is wearing thin” and calling for “UNCONDITIONAL SURRENDER!” from Iran.
Current and former administration officials told NBC News that Trump is weighing various options regarding Iran, including potential military strikes. A source familiar with internal discussions said the administration is considering joining Israel in strikes against Iranian nuclear sites.
Despite these tensions, markets appear to be shrugging off geopolitical risks. “The market just seems very keen to fade geopolitical risk,” said Zachary Hill, head of portfolio management at Horizon Investments. “That has been historically the right thing to do, so I think that’s kind of what’s driving us so far today.”
Economic Data
New housing construction data released Wednesday showed starts at their lowest level in five years. Housing starts ran at a seasonally adjusted annual rate of 1.256 million for May, down 9.8% from April and the slowest since May 2020. This fell short of economists’ expectations of 1.35 million.
Building permits also declined more than anticipated, totaling 1.393 million, down 2% from the prior month and below the forecast of 1.42 million.
In more positive news, initial unemployment claims for the week ending June 14 totaled 245,000, down 5,000 from the previous week and close to the estimate of 246,000.
Major Stock Movements
Among the “Magnificent Seven” stocks, Nvidia (NVDA) has shown strength recently, rallying 2% on Monday and continuing its positive momentum. The AI chipmaker beat Wall Street’s lowered targets for its fiscal first quarter, though its sales guidance for the current period was below expectations.
Tesla (TSLA) has faced challenges, with shares down about 40% from their all-time high set in December. The electric vehicle maker was recently downgraded by Baird from outperform to neutral.
Apple (AAPL) shares have struggled in 2025, down 18.6% year-to-date as of early June. The company reported better-than-expected March-quarter results, but investors remain concerned about the impact of tariffs on hardware sales and legal challenges to its services business.
Microsoft (MSFT) has been a bright spot, up 11.6% this year after crushing Wall Street’s targets for its fiscal third quarter and guiding above expectations for the current period.
Upcoming Market Events
Several important economic indicators are scheduled for release in the coming days. The UK will report CPI data today, with year-over-year inflation expected at 3.5%, up from 3.3% previously.
Central bank decisions are also in focus, with Indonesia and Sweden announcing interest rate decisions today. Indonesia is expected to maintain its rate at 5.25%, while Sweden’s decision could impact European markets.
#b#Looking ahead to next week, investors will be watching for the U.S. Consumer Price Index (CPI) data on June 11, which will provide further insights into inflation trends and potential Fed policy directions.#/b#
Market Outlook
Despite geopolitical tensions and mixed economic data, U.S. markets continue to show resilience. The upcoming Fed decision will likely set the tone for trading in the days ahead, with particular attention on any signals regarding potential rate cuts later this year.
Oil prices, which spiked 4% on Tuesday amid Middle East tensions, have moderated slightly as markets assess the likelihood of supply disruptions from the Iran-Israel conflict.
As we move through the second half of 2025, investors should remain vigilant about inflation data, Fed policy decisions, and developments in international conflicts that could impact global markets and supply chains.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.