U.S. stock futures were little changed on Tuesday as investors awaited the outcome of the Federal Reserve’s two-day policy meeting. With a 25-basis-point rate cut widely expected, markets are focusing less on the decision itself and more on what Chair Jerome Powell will signal about the path of monetary policy heading into year-end.

Muted Futures Reflect Investor Caution

Futures on the S&P 500, Nasdaq 100, and Dow Jones Industrial Average traded in a narrow range, signaling that investors are reluctant to make major moves before the Fed meeting concludes. The S&P 500 recently hit record territory above 6,800, fueled by optimism around soft-landing expectations and resilient corporate earnings. Yet, the lack of strong momentum this week suggests traders are wary of potential surprises in the Fed’s forward guidance.

The Nasdaq 100, which has led gains this year on the back of AI and tech-driven enthusiasm, also paused as investors assess whether looser financial conditions might sustain the rally—or if the Fed could temper expectations with cautious language.

Bond Market and Yield Outlook

U.S. Treasury yields remained largely unchanged, with the 10-year note hovering near 4.2%. The stability in yields reflects the market’s confidence that a rate cut is already priced in. However, traders are divided on how many additional cuts could follow in the coming months.

A more hawkish tone from the Fed—indicating a slower pace of future easing—could trigger a rise in yields and pressure equities, particularly in interest-sensitive sectors like real estate and utilities. Conversely, dovish remarks pointing to continued policy support could reinforce risk appetite and lift equities further.

Global Market Context and Israeli Impact

Global markets mirrored the cautious sentiment, with European equities opening flat and Asian trading mixed. For Israeli investors, the Fed’s stance remains critical, as it influences global capital flows and the shekel’s exchange rate. The Tel Aviv 35 index has recently tracked global trends, reflecting both optimism about lower U.S. rates and sensitivity to global risk appetite.

A dovish signal from the Fed could provide support for Israeli equities and bonds, while a stronger dollar or tighter policy outlook might weigh on risk assets globally. The Bank of Israel’s own monetary trajectory—closely linked to the Fed’s actions—will also remain under scrutiny.

Looking ahead, markets will focus on the Fed’s updated economic projections and the “dot-plot” forecast to gauge how many cuts policymakers envision through 2026. Investors will also monitor Powell’s press conference for clues on inflation concerns, growth expectations, and the central bank’s confidence in achieving a soft landing. With global growth slowing and geopolitical risks rising, the tone of the Fed’s communication could determine whether markets maintain their record-high optimism—or enter a period of renewed volatility.