The market is at a standstill. With the Fed's decision looming and growing political pressure from two fronts — monetary and geopolitical — market participants are bracing for a sharp shift in direction. Now more than ever, the key is not to guess the move, but to understand what will trigger it. The fact is that in the next 24–48 hours, reaction, not positioning, will be the most valuable asset.
This morning, markets are waking up in a state of anxious anticipation. The S&P 500 futures are trading around 5,990, and the Nasdaq 100 is near 21,800. After Tuesday's sharp drop, markets are in no rush to resume their climb. Thus, the S&P 500 is down 0.84%, the Nasdaq is down 0.91%, and the Dow is off 0.7%. The focus is squarely on the Fed's policy decision and everything tied to it.
The Fed is widely expected to keep rates unchanged, but this time, it is not the numbers that matter, it is the words. Jerome Powell's comments and the updated economic projections, including the dot plot, could set the tone not only for the coming days but for the rest of the summer.
Will easing come closer to fall? Or will the Fed hold steady into 2025, despite geopolitical unrest and weakening consumer demand?
The context for this meeting is the most complex in recent months. Trump has ramped up tensions with Iran. On Truth Social, he demanded "unconditional surrender" and threatened direct strikes against Iran's top leadership.
For markets, such headlines are not just background noise. They carry implications for oil prices, inflation expectations, and, therefore, monetary policy shifts.
Special attention should be paid to macroeconomic data. Wednesday's releases include housing starts and weekly jobless claims. With the Independence Day holiday on Thursday, traders are looking to reduce exposure, which could increase volatility and trigger unusual moves even on neutral data.
Tuesday's decline was broad-based: 10 out of 11 S&P 500 sectors closed in the red. The only exception was energy, boosted by another surge in oil prices amid Middle East tensions.
This strengthens the scenario where geopolitics once again actively shapes inflation expectations and, as a result, regulatory response.
Technical analysis
The S&P 500 is nearing the lower boundary of a key support area. The 5,950–5,930 zone is a critical line for maintaining a bullish bias. Tuesday's drop toward 5,970 was met with localized buying but so far has not produced a convincing reversal signal.
Resistance lies at 6,025–6,035. A breakout above, particularly post-Fed, could reignite momentum toward 6,070 and even 6,100. However, without clear guidance from Powell, that scenario remains unlikely.
The RSI hovers near a neutral territory; the MACD is turning lower. Overall, the technical picture reflects a wait-and-see mode: the market is holding, but no longer charging ahead.
The Nasdaq 100 is again testing the 21,700–21,900 zone, which has acted as both support and resistance in recent weeks. A break below 21,650–21,500 could trigger a correction toward 21,300, where major volume clusters formed in June.
To the upside, a breakout above 21,950 would give a chance to test 22,100, though for now, that looks like a stretch.
Amid heightened geopolitical sensitivity, the tech sector, historically considered risky, could come under additional pressure if inflammatory rhetoric continues.
Scenarios for coming days
Main scenario: The Fed holds rates steady but accompanies the decision with moderately dovish rhetoric. Inflation projections are revised slightly lower, and the dot plot hints at a rate cut in Q4.
The market fluctuates at first, then stabilizes, especially if geopolitical tensions remain contained. The S&P 500 returns to 6,030–6,050, and the Nasdaq 100 climbs back above 22,000.
Alternative scenario: The Fed remains hawkish, hinting at a prolonged pause. Labor or housing data comes in hotter than expected, increasing fears of a delayed rate cut cycle. Powell emphasizes uncertainty without offering clarity.
Combined with escalating Trump rhetoric, markets react negatively. The S&P 500 tests 5,930–5,910, and the Nasdaq slides to 21,500.
Black Swan: Within 48 hours, the Middle East situation spirals—strikes, sanctions, oil spike. Thin holiday trading amplifies volatility. Indices risk a sharp plunge, especially against the backdrop of a thin market ahead of the holidays.
