U.S. stock index futures recorded modest gains on Tuesday evening as markets prepared for the close of a Federal Reserve meeting that is broadly expected to result in no change to interest rates. The anticipated memorandum of understanding between the U.S. and Iran, which market participants expect will end hostilities and reopen the Strait of Hormuz, was another focal point for traders.
By 19:12 ET (23:12 GMT), S&P 500 futures were up 0.05% at 7,591.50 points. Nasdaq 100 futures also rose 0.05%, trading at 30,335.50 points, and Dow Jones futures were up 0.08% at 52,513.0 points.
Futures advanced following a mixed cash session on Wall Street. The S&P 500 and the Nasdaq closed lower, while the Dow Jones Industrial Average finished higher at a record level. Market action reflected a rotation away from high-flying technology names and into stocks viewed as more sensitive to the economic cycle.
Individual movers in afterhours trading illustrated the split market tone. SpaceX (NASDAQ:SPCX) continued to rise after what was described as a stellar market debut last week, adding another 2.1% in aftermarket trading. By contrast, Lionsgate Studios Corp (NASDAQ:LION) slipped 5% after the bell, reversing gains from the regular session after reports indicated Netflix was not considering an acquisition of the studio.
Fed meeting set to hold rates
The Federal Reserve is widely expected to hold the federal funds rate steady at 3.75% when it concludes its two-day meeting on Wednesday. This will be the first policy meeting presided over by new Fed Chair Kevin Warsh, and market participants will be watching closely for any revisions to the central bank's outlook on the economy and interest rates.
Markets currently expect no major near-term changes to the Fed's policy trajectory, in part because the central bank is confronting inflationary pressures tied to elevated energy costs. At the same time, the resilience of the labor market is seen as providing the Fed with more latitude to keep rates unchanged.
However, officials may feel compelled to adjust their forward guidance in light of the thawing in U.S.-Iran tensions. Oil prices fell sharply after the two countries announced a peace agreement, a move that has the potential to ease energy-driven inflation in coming months and could influence the Fed's assessment of the outlook.
Market leadership shifts - Dow at record while S&P and Nasdaq lag
The Dow closed up 0.6% on Tuesday at a record high. By contrast, the S&P 500 fell 0.6% and the NASDAQ Composite declined 1.2%. Investors appeared to be rotating out of technology names and into more economically sensitive sectors, with some positioning attributed to caution ahead of the Fed decision.
The technology sector was vulnerable to profit-taking after strong gains over the prior two sessions. Chipmakers had been a notable driver of recent tech strength, fueled by ongoing optimism around artificial intelligence, and that segment's recent run helped set the stage for short-term trimming of positions.
Overall, the late-day futures movement and the intraday rotation suggest markets are balancing near-term policy expectations with geopolitical developments that have immediate implications for energy prices and inflation dynamics. Traders will remain attentive to the Fed's language following the meeting and to any further developments related to the U.S.-Iran memorandum.