Pre-Market Pulse 19th June – Stocks lower as Fed signals slower pace of cuts due to Trump uncertainty

Overnight – Stocks lower as Fed signals slower pace of cuts due to Trump uncertainty

Stocks gave up early gains to close lower overnight, 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

The Federal Reserve decided to keep interest rates steady in the 4.25%-4.50% range, signaling a more hawkish stance by forecasting fewer rate cuts for the coming years due to concerns about slowing economic growth and persistent inflation. While the Fed still anticipates two rate cuts this year, maintaining its projection for the benchmark rate to fall to 3.9%, it now expects a slower pace of cuts in 2026 and 2027, with rates projected to reach 3.6% and 3.4% respectively, both higher than previous forecasts. Recent economic data showed a modest 0.4% increase in U.S. single-family housing starts in May, but a significant drop in building permits suggests ongoing challenges in the housing market, compounded by tariffs and excess inventory. Meanwhile, new unemployment claims fell by 5,000 to 245,000, but the level remains consistent with a weakening labour market.

Geopolitical tensions in the Middle East have intensified, impacting investor sentiment. Iran’s Supreme Leader Ayatollah Ali Khamenei publicly rejected U.S. President Donald Trump’s demands for unconditional surrender, emphasizing that Iran would not yield to threats and warning of severe consequences if the U.S. pursued military intervention. This statement followed recent Israeli strikes on Iran and comes as President Trump and his administration consider various options, including possible military action against Iranian nuclear facilities, though Trump also indicated that Iran is open to negotiations.

In the financial sector, U.S. bank regulators are reportedly planning to lower the enhanced supplementary leverage ratio (ESLR) for the largest banks, such as JPMorgan Chase, Goldman Sachs, and Morgan Stanley, from 5% to a range of 3.5%-4.5% to address concerns that current requirements restrict their trading of U.S. Treasurys. Elsewhere in the markets, Peloton Interactive’s stock rose nearly 2% after securing financing and reducing costs, Hasbro’s shares edged higher following a 3% workforce reduction amid higher tariffs, and Circle Internet Group surged 20% after the Senate passed the GENIUS Act, establishing a regulatory framework for stablecoins and potentially paving the way for broader adoption.