Tesla reportedly puts IT executive in charge of North American sales
Investing.com -- The S&P 500 gave up gains to close slightly lower Wednesday, after Federal Reserve left interest rates unchanged, but signaled a slower pace of rate cuts ahead as uncertainty about the impact of President Donald Trump’s polices including tariffs continue to muddy the outlook on the economy.
At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average fell 44 points, or 0.1%, the S&P 500 fell 0.04%, higher, and the NASDAQ Composite gained 0.1%.
Fed keeps rates steady, but trims rate cuts for next year
The Fed to hold rates steady in the 4.25%-4.50% range, and signaled a hawkish tilt after forecasting fewer cuts next year amid concerns about slowing growth and faster inflation.
Fed members continue see the benchmark rate falling to 3.9% this year, maintaining forecast for two rate cuts. For 2026, the Fed now expects fewer rate cuts, forecast rates to fall to 3.6% in 2026, up from a prior forecast of 3.4% in March. For 2027, the committee revised its policy rate outlook higher, seeing rates falling to 3.4%, up from 3.1% previously.
Data released Wednesday showed that U.S. single-family housing starts increased 0.4% in May, but a sharp drop in building permits for future construction pointed to subdued housing market conditions amid headwinds from tariffs and excess inventory of unsold homes.
The number of Americans filing new applications for unemployment benefits fell last week, dropping 5,000 to a seasonally adjusted 245,000, but stayed at levels consistent with a further loss of labor market momentum in June.
Iranian leader raises Middle East tensions
The ongoing conflict in the Middle East continues to cast an overhang on investors, especially after Iran’s Supreme Leader Ayatollah Ali Khamenei rejected U.S. President Donald Trump’s demands for unconditional surrender in a statement read by a television presenter earlier Wednesday.
This marked his first public comments since Friday, when he delivered a speech after Israel began bombarding Iran.
"Intelligent people who know Iran, the Iranian nation, and its history will never speak to this nation in threatening language because the Iranian nation will not surrender," Khamenei stated.
The Supreme Leader emphasized that neither peace nor war could be imposed on the Islamic Republic, adding a direct warning to the United States.
"The Americans should know that any U.S. military intervention will undoubtedly be accompanied by irreparable damage," he said.
According to a Reuters report on Wednesday, President Trump and his team are evaluating several options, including potentially joining Israel in strikes against Iranian nuclear facilities.
In comments Wednesday morning, Trump said he may or may not strike Iran. He also stated that Iran is eager to engage in talks.
Banking sector in spotlight
The banking sector will be in focus Wednesday, after Bloomberg reported that top U.S. bank regulators intend to reduce a key capital buffer for the country’s biggest lenders, amid concerns that the buffer constrained their trading of U.S. Treasurys.
The Federal Reserve, the Federal Deposit Insurance Corp, and the Comptroller of the Currency, plan to lower the enhanced supplementary leverage ratio (ESLR) by up to 1.5 percentage points, Bloomberg said, citing people briefed on the plans. The ESLR could be lowered to a range of 3.5% to 4.5% from current levels of 5%.
The rule applies to the biggest U.S. banks, such as JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS).
The ESLR is a capital requirement for large, systematically important U.S. banks that ensures the lenders hold enough capital to act as a backstop against more risk-based capital holdings, and the ESLR could be lowered to a range of 3.5% to 4.5% from current levels of 5%.
Elsewhere, Peloton Interactive (NASDAQ:PTON) stock climbed nearly 2% after the exercise equipment and media company secured financing and cut costs over the past year or so to dilute concerns of bankruptcy.
Hasbro (NASDAQ:HAS) stock edged higher after the toy manufacturer cut 3% of its global workforce in its latest cost-cutting effort amid higher U.S. tariffs on toys from China.
Circle Internet Group Inc (NYSE:CRCL), meanwhile, jumped 20% adding to gains since making its positive stock market debut last week, after the Senate passed the ’GENIUS Act’, which sets up a regulatory framework around the approval and supervisions of U.S. issues of stablecoins-- a move that many expect could driver wider mainstream adoption.
Peter Nurse, Ayushman Ojha and Peter Nurse contributed to this article