S&P 500: Fed’s Inflation Stance Keeps Market on Edge Before Powell’s Remarks

S&P 500 Futures Rise as Fed Decision Looms

 

S&P 500 futures edged higher early Wednesday as traders braced for the Federal Reserve’s policy decision and updated economic projections. Futures tied to the S&P 500 rose 0.2%, while Nasdaq-100 futures gained 0.3%. Dow Jones Industrial Average futures ticked up 31 points, or 0.1%.

The Fed is widely expected to keep rates steady in the 4.25%-4.5% range, maintaining its cautious approach amid inflation risks and economic uncertainty. However, traders are closely watching the central bank’s updated projections on interest rates, GDP, and inflation, as expectations for rate cuts this year remain uncertain.

What Signals Will the Fed Provide?

While no immediate rate cut is expected, the Fed’s updated “dot plot” will provide insight into policymakers’ expectations for the rest of the year. The central bank’s December forecast suggested two cuts in 2025, but analysts now see a growing risk of just one—or even none—this year, depending on inflation trends and trade developments.

If Fed Chair Jerome Powell signals concern over inflation, the central bank could delay easing monetary policy further. Markets are also wary of President Trump’s trade policies, which could push inflation higher if new tariffs are imposed. A hawkish tone from the Fed could drive Treasury yields higher and weigh on equity markets.

Market Volatility Ahead?

Stocks have struggled in recent sessions, with the S&P 500 dropping over 1% on Tuesday and the Nasdaq losing 1.7% as tech stocks extended losses. The broad market remains under pressure, with the S&P 500 down 8.6% from its February record close.

Nvidia, which has lost over 17% in the past month, saw a slight rebound in premarket trading after announcing new AI chips set to launch in 2025 and 2026. UBS upgraded the stock, saying the recent selloff presents a buying opportunity.

Meanwhile, Tesla gained nearly 3% after securing approval for a passenger transportation permit in California, potentially paving the way for robotaxi services.

Will the Fed’s Decision Impact Bonds and Commodities?

Treasury yields have remained stable ahead of the Fed decision but could rise if Powell signals a prolonged high-rate environment. A more restrictive outlook could also strengthen the U.S. dollar, pressuring commodities like gold, which typically moves inversely to real interest rates.

What Should Traders Watch Next?

Markets are pricing in at least two rate cuts this year, but the Fed’s updated projections may indicate a slower pace of easing. If Powell stresses patience in cutting rates, bond yields could climb, equities may face additional pressure, and the dollar could extend gains. Traders will closely analyze Powell’s press conference for any shifts in the Fed’s policy outlook.

More Information in our Economic Calendar.