US stock markets posted modest gains on Wednesday as traders awaited a key interest rate decision from the Federal Reserve and continued to track escalating tensions between Israel and Iran.
The Dow Jones Industrial Average rose by 258 points, or 0.6%, while the S&P 500 and Nasdaq Composite each gained approximately 0.5% and 0.6%, respectively. The uptick came after a weaker session Tuesday, when geopolitical concerns weighed on investor sentiment.
The conflict between Israel and Iran entered its sixth day, marked by stern warnings from Iran’s supreme leader, Ayatollah Ali Khamenei, who cautioned that any US involvement could result in “irreparable damage.” Meanwhile, President Donald Trump, using his Truth Social platform, responded by demanding Iran’s “unconditional surrender,” and officials have said the administration is considering military options.
Despite the geopolitical uncertainty, markets appeared resilient.
“The market just seems very keen to fade geopolitical risk,” said Zachary Hill, head of portfolio management at Horizon Investments.
He noted that historically, markets have tended to stabilize quickly following international conflicts.
All eyes now turn to the Federal Reserve, which is expected to announce its interest rate policy later Wednesday afternoon. While no rate changes are anticipated, investors are closely monitoring Fed Chair Jerome Powell’s comments and the updated “dot plot,” which outlines policymakers’ interest rate projections.
Market data suggests there’s about a 55% chance of a rate cut by September, though many expect the Fed to hold steady for now amid mixed economic signals.
Historically, the S&P 500 has shown volatility on “Fed days.” According to Bespoke Investment Group, the index often rises after the initial rate decision, only to retreat during Powell’s subsequent press conference.
The latest economic data paints a mixed picture. US housing starts in May fell to their lowest level since 2020, down 9.8% month-over-month. Building permits also declined. In contrast, jobless claims ticked down slightly last week to 245,000, consistent with a labor market that appears to be softening but not contracting.
JPMorgan analysts noted that recent tariffs are beginning to affect consumer behavior and economic indicators.
“The continued rise in import prices suggests the tax bite is being felt domestically,” said JPMorgan economist Nora Szentivanyi.
Energy stocks were among the top performers, driven by rising oil prices amid concerns over the Strait of Hormuz, a key global oil shipping route. US crude prices rose more than 4% on Tuesday, reaching their highest level since January.
Meanwhile, other notable market movers included:
Scholar Rock: Shares surged after a trial showed its experimental drug helped preserve lean muscle in patients using weight-loss drugs.
Circle Internet: The stablecoin issuer rose 6.2% after the Senate passed the GENIUS Act, creating a regulatory framework for stablecoins.
Nucor: The steelmaker’s stock rose nearly 5% after it issued a stronger-than-expected Q2 profit forecast.
Tesla and Marvell Technology: Tesla shares climbed 1.8%, while Marvell jumped 8.7% amid optimism about its AI chip business.
Despite the gains, investors remain cautious.
“We’re still at the beginning stages of feeling that real income shock from higher tariffs in the US,” said Goldman Sachs strategist Simon Dangoor, who warned that the next few months of data will be critical for assessing the economy’s direction.
US equity and bond markets will be closed Thursday in observance of Juneteenth.
With input from CNBC, the Wall Street Journal, and Reuters.
