Following the open on Wall Street, technology stocks retreated slightly as that caused the Nasdaq 100 to turn lower, while the Dow and Russell both rallied with the latter breaking to a new 2025 high. Investors have hit the pause on tech stocks ahead of the FOMC, and some concerns about valuations – although those concerns have been continually shrugged off. So, it looks like investors are taking no chances ahead of the FOMC meeting, choosing to take profit on what has been another amazing bull run for technology stocks in recent weeks. Overall, sentiment remains positive towards stocks amid AI optimism and hopes over rate cuts. The Dow Jones forecast remains bullish heading into the Fed meeting, particularly as it was trading near an all-time high, meaning momentum remains strong.
Dow Jones forecast: All eyes on the Fed
Apart from the rallying Russell and Dow, the other two benchmark indices have eased back from record highs, with the synchronized pullback in other assets like gold and silver, all suggesting profit-taking ahead of the Federal Reserve’s policy decision. However, the renewed slide in the dollar—particularly against the yen and yuan—signals that selling pressure in gold may be short-lived. The same argument can be made for technology stocks. Should the Fed lean more dovish than markets currently expect, risk appetite could quickly regain momentum and potentially push the major indices to fresh all-time highs.
The real debate is not over today’s decision, but whether policymakers will follow through with additional cuts before year-end. Market participants will therefore look past the rate cut itself and instead focus on the bigger picture: how far the Fed is prepared to go in easing policy and whether its guidance signals a more aggressive cutting cycle.
House market data disappoints
From a macro point of view, today's housing market data disappointed with both housing starts and building permits printing 1.31 million annualised units compared to forecasts of 1.37 million respectively. This comes on the back of retail sales data from yesterday, which rose more than expected. But do these macro pointers matter much? Well, the retails data certainly suggests it is not all doom and gloom out there, but this is probably too little too late to prevent a rate cut today. The Fed has clearly signalled it will trim rates and everyone expects them to do so. But the recent dollar selling was never about this week’s likely rate cut. It was all about whether we will get one or two more cuts before the year is out. Well, the jury is still out on that, as surely one retail sales report is unlikely to sway the Fed in one or the other direction. So, from a rate cut perspective, traders may take the retail sales beat in their stride and continue to buy dips in stocks, foreign currencies and gold.
With stocks remaining largely on the front foot, investors are likely to continue viewing dips in stocks and foreign currencies as buying opportunities. If the Fed’s communication today tilts dovish—whether through the dot plot, Powell’s remarks, or guidance—the Dow Jones forecast could take a fresh boost, continuing its upward climb and potentially setting fresh records, especially given how strong the momentum behind the move has been.
Technical Dow Jones forecast: Key levels to watch
The Dow Jones chart remains constructive as things stand. After consolidating for several sessions above the key 45,000 level—broken decisively in late August—the index finally staged a strong breakout last Thursday, clearing interim resistance around the 45,700–45,800 zone. This move confirmed that the bulls remain firmly in control. This week, the index consolidated above this former resistance zone and judging by today’s latest push, it looks like that area has indeed now turned into support. As long as the index now holds above this area, the uptrend will look solid.
That said, a drop back below 45,700–45,800 area could create short-term turbulence. Even so, the broader trend continues to point higher. The real line in the sand is 45,000—losing that would shift the tone and undermine the Dow Jones forecast. Until then, higher highs remain the more likely outcome.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
