S&P 500 slips as Fed meeting nears; Nikkei nears 70,000

U.S. equity benchmarks eased on Tuesday as investors reduced risk ahead of Federal Reserve Chair Kevin Warsh’s first policy meeting and updated economic projections. The S&P 500 fell 0.6% and the Nasdaq 100 declined 1.9%. Markets expect the Fed to keep the policy rate at 3.50%–3.75%. The decision is scheduled for 2:00 a.m. Singapore time on Thursday, followed by Warsh’s press conference at 2:30 a.m. SGT.

Crude prices plunged after traders priced in a likely formal agreement between the U.S. and Iran and the planned reopening of the Strait of Hormuz later this week. West Texas Intermediate fell 5.6% to $76.61 a barrel, and Brent slipped to $79.33. Market participants said hundreds of previously stranded tankers are expected to transit the Persian Gulf, reducing the conflict-related premium on prompt oil contracts.

Lower oil helped push sovereign bond yields down. The benchmark 10-year U.S. Treasury yield dropped three basis points to 4.44%. Germany’s 10-year Bund fell to 2.94% and Britain’s 10-year Gilt remained near 4.81%. Spot gold rose to $4,331 an ounce as yields eased.

Equity performance varied by sector. Semiconductor stocks led losses, with the SOX index down about 5.7% on profit-taking. The Dow Jones Industrial Average rose 0.6% to a record high, supported by gains in financials and industrials; Goldman Sachs added about 1.35% and Caterpillar about 1.24%. SpaceX extended a post-IPO rally, briefly reaching an intraday market value near $2.66 trillion before pulling back.

U.S. housing starts fell 15.4% month-on-month in May to their lowest level since May 2020, reflecting a sharp drop in construction activity for the month.

In Asia, markets were mixed. Japan’s Nikkei 225 rose about 0.4% and approached the 70,000 level while the 10-year Japanese government bond yield held around 2.62%. South Korea’s KOSPI and Taiwan’s TAIEX fell roughly 0.2% and 0.8% respectively, driven by weakness in chip and technology names. Singapore’s STI climbed about 0.8% toward an intraday record of 5,160. The Australian dollar finished near $0.7067 after Reserve Bank Governor Bullock signalled a hawkish stance that left open the possibility of further tightening.

Chinese data released for May showed retail sales contracted 0.6% year-on-year, while industrial production rose 4.5% year-on-year.

Investors will monitor the Fed’s policy statement and Warsh’s press remarks for guidance on inflation and the economic outlook. Traders will also watch weekly energy inventory reports and the pace of maritime traffic through the Persian Gulf for signals on oil prices and near-term inflation pressures.