S&P 500 Forecast: US Stocks Face Pressure as Recession Risks Climb

Stock Futures Slip as Traders Await Fed Decision and Economic Data

U.S. stock futures edged lower Tuesday after two consecutive winning sessions, as investors turned their attention to the Federal Reserve’s policy meeting and key economic data. Concerns over growth, trade policy, and inflation expectations remained in focus, with housing reports and recession risk assessments adding to market uncertainty.

Are Markets Stabilizing After Recent Sell-Off?

Dow Jones Industrial Average futures fell 86 points (-0.2%), while S&P 500 and Nasdaq 100 futures slipped 0.3% and 0.4%, respectively. The pullback follows a short-lived recovery after last week’s correction, which saw the S&P 500 dip more than 10% from recent highs. The Nasdaq remains in correction territory, reflecting ongoing weakness in technology stocks.

Tesla, a key underperformer during the market downturn, fell another 3% in premarket trading after RBC Capital Markets lowered its price target. The firm cited increasing competition in the electric vehicle sector. Tesla has dropped nearly 33% over the past month, highlighting investor concerns over growth in high-valuation tech names.

What Is the Fed Expected to Do?

The Federal Reserve begins its two-day policy meeting Tuesday, with traders widely expecting rates to remain unchanged. According to CME’s FedWatch tool, futures markets are pricing in a 99% probability that the central bank will hold steady. However, investors will closely monitor Fed Chair Jerome Powell’s comments for signals on future rate cuts and economic concerns.

A CNBC Fed Survey indicated growing recession fears, with respondents raising the probability of a downturn to 36%, up from 23% in January. Inflation concerns have taken a backseat to fiscal policy risks, particularly uncertainty around trade tariffs and government spending cuts. Analysts have lowered GDP forecasts for 2025 to 1.7% from 2.4%, reflecting a weaker economic outlook.

How Does Housing Data Fit Into the Picture?

February housing data showed an 11.2% rise in housing starts to an annualized 1.501 million units, signaling resilience in home construction. However, building permits fell 1.2%, extending a decline that suggests future construction activity may slow. The housing sector’s performance will be key in gauging consumer demand and potential economic weakness.

What’s Next for Traders?

With no major earnings on Tuesday, market direction will hinge on upcoming economic data and the Fed’s policy announcement Wednesday. Key reports on imports, and industrial production could provide additional clues about economic strength. Traders should prepare for volatility as Powell’s comments shape expectations for rate cuts and economic growth in the months ahead.

More Information in our Economic Calendar.