S&P500: Fed Uncertainty and Mideast Tensions Weigh on US Stocks Today

S&P 500 Slips in Early Trade as Fed Signals and Mideast Risks Dominate Market Focus

Stocks opened modestly lower Friday, with the S&P 500 down 0.16% shortly after the bell as traders absorbed mixed messages from the Federal Reserve and escalating geopolitical tensions. This early dip followed a quiet post-holiday session where sentiment stayed fragile due to conflicting central bank commentary and uncertainty in the Middle East.

Could a July Rate Cut Still Be on the Table?

Federal Reserve Governor Christopher Waller hinted before the open that the central bank might be in a position to cut interest rates as soon as July. Speaking on CNBC, Waller said, “We could do this… as early as July,” though he acknowledged that such a move would depend on broader committee agreement. This came in contrast to Fed Chair Jerome Powell’s more cautious stance earlier in the week, reinforcing that any move would be data-driven.

The mixed guidance followed renewed criticism from Donald Trump, who blamed Powell for delaying cuts that he claims are costing the economy “hundreds of billions of dollars.” With futures pricing in a roughly 60% chance of a September cut, traders are watching closely for clues on timing.

Middle East Headlines Keep Traders on Edge

Markets remained alert to rising tensions between Israel and Iran. Trump said Thursday he would decide on a potential strike within two weeks, though he’s open to negotiations. Meanwhile, Israeli leadership has ordered targeting of strategic and government sites in Iran. Any escalation that threatens oil infrastructure could rattle global markets and rekindle inflation fears, especially if Brent crude climbs back toward $90.

Manufacturing Miss Reinforces Growth Concerns

Economic data released early in the session showed the Philadelphia Fed’s manufacturing index came in at -4 for June, below the -2 estimate. New orders and employment both remained weak, with the job component falling to levels not seen since mid-2020. The report underlines that despite inflation moderating, economic momentum is uneven.

Bearish Sentiment Builds Again in Early Trade

The American Association of Individual Investors reported that 41.4% of respondents now expect stocks to decline over the next six months, up sharply from 33.6% last week. Bullish sentiment dropped to 33.2%, well below its long-term average. That bearish tilt is already influencing positioning early in today’s session, with tech and cyclical names seeing profit-taking.

What Should Traders Watch Into the Close?

As the session develops, traders will be focused on Fed speakers, potential headline risk out of the Middle East, and any signs of sector rotation. With rate cut timing unclear and geopolitical risk heating up, price action will likely remain sensitive to any updates. Energy, defense, and rate-sensitive stocks should stay in focus through the day.

More Information in our Economic Calendar.