S&P500 Forecast Today: Is the Market Ready for a Fed Pause or Hawkish Surprise?

Stock Futures Edge Higher as Traders Brace for Fed Decision and Middle East Tensions Escalate

U.S. stock futures rose modestly on Wednesday ahead of a highly anticipated Federal Reserve rate decision and mounting geopolitical risks in the Middle East. As the S&P 500 and Nasdaq 100 ticked up 0.1% and 0.2% respectively, market participants weighed fresh economic data and volatile international developments.

Federal Reserve Decision: Will Powell Calm the Markets?

All eyes are on the Federal Reserve’s 2 p.m. ET rate decision, with expectations centered on a pause. Still, traders are focused on any forward guidance from Chair Jerome Powell, especially regarding the “dot plot” and inflation risks. With equity valuations elevated and little room for policy missteps, a hawkish tone could stoke volatility across rates and equities. The bond market has priced in stable rates for now, but Powell’s post-meeting remarks will set the tone for risk assets into Q3.

Middle East Conflict Adds to Risk Premium

Geopolitical risks surged after Iran’s Ayatollah Ali Khamenei warned of “irreparable damage” if the U.S. engages militarily. The threat followed aggressive rhetoric from Donald Trump and speculation about U.S. military options. Markets have largely absorbed the Israel-Iran conflict thus far, but extended unrest or U.S. involvement could rattle oil prices and drive flight-to-safety flows into Treasuries and gold.

Housing Starts Drop, Jobless Claims Steady—What Does It Mean for Reflation Plays?

Economic data released Wednesday added to trader caution. Housing starts fell to 1.256 million in May, the lowest since 2020 and well below the 1.35 million forecast. Permits also declined to 1.393 million, reinforcing downside risk for construction and materials sectors. Meanwhile, jobless claims came in at 245,000, slightly below expectations. Though the labor market remains stable, the 4-week average has reached a near two-year high, hinting at a potential softening trend.

Korn Ferry Rallies on Earnings Beat but Lags Broader Index

Korn Ferry stock jumped nearly 7% in premarket trading after posting better-than-expected quarterly results. Earnings of $1.32 per share on $712 million in revenue beat estimates, though the stock remains down over 1% year-to-date. Traders should watch for whether this beat can reverse the firm’s relative underperformance versus the S&P 500.

Outlook: Cautious Near-Term as Fed, Geopolitics and Data Converge

With Fed policy, war risk, and softening economic signals colliding, markets are likely to stay cautious. Expect increased volatility in equities and rotation into defensives if Powell strikes a hawkish tone or tensions escalate. Traders should be alert to breakouts in safe-haven assets and pressure on housing-linked equities.

More Information in our Economic Calendar.