US markets ended the day without major movements amid the ongoing conflict in the Middle East and the Fed’s key interest rate decision

If you didn‘t know the context, today might seem quite ordinary for the American stock market: the main indexes have hardly changed. However, in fact, the day was full of geopolitical events and expectations regarding the prospects for the Fed‘s policy.

The conflict between Israel and Iran was a key driver in the early trading. Stocks moved higher thanks to President Trump‘s statement that Iran still has time for negotiations; this hint of the possibility of a diplomatic solution — despite the president‘s warning yesterday that his patience was “running out“ — was positively received by the market.

However, the president also repeated that Iran cannot possess nuclear weapons, and added that the end of this week or the beginning of next week will be “important.“ These words partially dampened optimism about the possibility of a diplomatic outcome, but the indices held their growth until the publication of the FOMC decision and updated economic forecasts (SEP) at 14:00 eastern time.

As expected, the FOMC unanimously maintained the target range of the federal funds rate at 4.25–4.50%. However, SEP caused confusion: the median forecast for the number of rate cuts by the end of the year remained at two (as in the March forecast), but the median forecast for PCE inflation was raised to 3.0% from 2.7%, and for the base PCE to 3.1% from 2.8% for 2025.

The forecast for real GDP growth was lowered from 1.7% to 1.4%, and the forecast for the unemployment rate was raised from 4.4% to 4.5%. At a press conference, Fed Chairman Powell stressed that the level of uncertainty remains high and that the Committee needs more time to evaluate incoming data before the next rate decisions. He also noted that due to tariffs, we should expect a noticeable increase in inflation in the coming months.

After the decision and the press conference, the indices moved away from intraday highs, bond yields rose, but the reaction was restrained given the significance of the events. As a result, the S&P 500 closed unchanged, the yield on 2–year Treasury bonds remained at 3.95%, and the yield on 10–year ones rose by 1 bps to 4.40%.

In general, despite the weakening of purchases, there were also no active sales. The distribution of dynamics by sector reflected a general wait-and-see attitude. Four sectors closed in the green, with the information technology sector becoming the leader (+0.4%). Seven sectors were in the red, but the energy sector (-0.7%) and the communications sector (-0.7%) lost slightly.

WTI crude futures rose to $75 per barrel during the day, but by the close they had fallen by +0.4% to $73.56 per barrel, amid expectations of a possible diplomatic settlement of the conflict.

Among other events: the CBOE VIX volatility index fell by 6.2% to 20.26; the number of initial applications for unemployment benefits remained at a relatively low level — 245,000; and the number of new housing starts in May fell to its lowest level in five years.

Our portfolio tried to stay in the positive zone this morning, but it quickly gave up and retreated to zero. After the publication of the results of the Fed meeting, the pressure increased, and as a result, the index closed with a decrease of 0.62% to the level of 781.26.