U.S. stock index futures were slightly higher early Wednesday, hinting at a modest rebound following Tuesday’s broad decline. Futures tied to the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 each pointed to a positive open as traders attempted to shake off the previous session’s jitters.
The market’s cautious optimism comes even as geopolitical anxieties remain elevated, particularly surrounding the escalating conflict between Israel and Iran. Tensions intensified after Iran’s Supreme Leader, Ayatollah Ali Khamenei, warned of severe consequences if the U.S. intervenes militarily, following former President Donald Trump’s public demand for Iran’s “unconditional surrender.”
Despite these headwinds, trading activity is expected to remain measured ahead of the Federal Reserve’s policy announcement this afternoon. While the Fed is widely anticipated to hold interest rates steady, investors will closely scrutinize Chair Jerome Powell’s comments and the central bank’s updated projections for insights into the future rate path.
Markets fell sharply on Tuesday, reversing Monday’s gains. The Nasdaq Composite dropped 0.9% (−180.12 points) to close at 19,521.09, while the S&P 500 lost 0.8% (−50.39 points) to settle at 5,982.72. The Dow Jones Industrial Average declined 0.7% (−299.29 points), ending the session at 42,215.80.
The sell-off was partly driven by profit-taking after Monday’s rally, which had been supported by speculation of a possible de-escalation in the Middle East. However, Trump’s abrupt departure from the G7 summit and his social media statements sparked renewed concerns over deeper U.S. involvement in the region.
Responding to reports that French President Emmanuel Macron claimed he had left the G7 to work on peace efforts, Trump posted, “He has no idea why I am now on my way to Washington, but it certainly has nothing to do with a Cease Fire. Much bigger than that.” A follow-up post demanding Iran’s surrender intensified investor fears.
Economic data also contributed to the day’s losses. The U.S. Commerce Department reported a sharper-than-expected decline in retail sales, which fell 0.9% in May, following a revised 0.1% dip in April. Economists had projected a milder 0.6% decline. Excluding vehicle-related sales, retail activity slipped 0.3%, missing forecasts of a slight gain.
Airline stocks, which had rallied earlier in the week, were hit hard, with the NYSE Arca Airline Index tumbling 3.8%. The housing sector also took a hit, as the Philadelphia Housing Sector Index dropped 2.5%.
Broader weakness was seen across several industries, including pharmaceuticals, telecommunications, and healthcare. In contrast, energy stocks advanced alongside rising oil prices, reflecting the market’s sensitivity to developments in the oil-rich Middle East.
With both geopolitical and monetary policy uncertainties looming, markets are expected to remain volatile in the short term.
Leave a Reply