Dow Jones Forecast: Stocks steady as the 2-day FOMC meeting begins

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Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures +0.04% at 34635

S&P futures +0.03% at 4455

Nasdaq futures -0.03% at 15220

In Europe

FTSE +0.05% at 7652

Dax -0.2% at 15680

  • FOMC kicks off 2-day meeting
  • OECD raises US growth forecast for this year and next
  • Instacart will IPO at $30 per share, the top end of the range
  • Brent hits $95 per barrel

OECD upwardly revised US GDP

US stocks are pointing to a flat start after ending the previous session flat amid a cautious start to the week as investors are choosing to sit on the sidelines ahead of the Federal Reserve interest rate decision tomorrow.

The Fed's two-day meeting kicks off later today, where the central bank will debate whether to raise interest rates from the current 22-year high of 5.25 to 5.5%. When the meeting concludes tomorrow, the Fed is expected to keep rates on hold. However, policymakers are likely to want to keep the door open to further hikes given hotter-than-expected inflation in August and rising oil prices.

Looking ahead, U.S. housing starts and building permits will be in focus. Recent data from the US has pointed to a resilient economy, which has led the OECD to raise its forecasts for US growth. The Paris-based body says that it now sees the US economy growing 2.2% this year rather than the 1.6% forecast in June. However, it sees growth slowing to 1.3% next year, but that is still up from the 1% forecast in June.

Corporate news

Instacart will be in focus as the grocery delivery firm is set to debut on Wall Street just days after ARM’s IPO. The San Francisco-based company is expected to float at the top end of its range of $28 to $30, valuing the company as $9.9 billion, well below the $39 billion it was worth in 2020, the company's last funding round.

Ford and GM remain in focus as the United Auto Workers union warned that if no progress in negotiations has been made by Friday, workers at more US factories would go on strike.

Dow Jones forecast – technical analysis.

After running into resistance at 35000 on Friday, the share price has rebounded lower to the 20 sma. The two dojo candles, as well as sitting on the 20 sma and the RSI at neutral, highlight the indecision in the market ahead of the Fed. Should the 20 sma hold, buyers will look for a rise above 35000, the September high. On the flip side, a break below the 20 sma could see sellers test 34500, last week’s low and the multi-month rising trendline support. Below here 34300 and the 100 sma comes into focus.

dow jones forecast chart

FX markets –USD falls, GBP rises

The USD is falling as the FOMC's two-day meeting is set to begin. The Federal Reserve is expected to hold interest rates at 5.25 to 5.5% after 10 straight hikes but is likely to leave the door open for another hike before the end of the year.

EUR/USD is a few pips higher despite eurozone inflation being downwardly revised. Eurozone CPI was lowered to 5.2% in August, down from a preliminary reading of 5.3% and 5.3% in July. Core inflation cooled from 5.5% to 5.3%. The data comes after ECB's governing council member Peter Kazimir said that he hoped last week's interest rate hike was the last but said the central bank may need until spring to conclude that no more hikes are needed.

GBP/USD is rising but remains close to a three-month low as investors await inflation data tomorrow and the Bank of England interest rate decision on Thursday. Expectations are for the Bank of England to hike rates again. The meeting comes after a report from the OECD, which suggests that the UK inflation problem is widening compared to its peers. The report sees average inflation for the UK over 2023 at 7.2%, up from 6.9% forecast in June.

EUR/USD +0.23% at 1.0715

GBP/USD +0.3% at 1.2421

 

Brent hits $95 per barrel

Oil prices have risen to a fresh 10-month high, and Brent hits $95 per barrel, with supply deficit concerns boosting the price for a fourth straight session.

While Saudi Arabia and Russia's extended supply cuts have been the main driving force behind oil’s recent rally, falling US shale output is adding to concerns about a tight market.

US shale-producing regions are on track to see a decline of 9.39 million barrels per day in October, falling to the lowest level since May and the third straight month of declines.

On the demand side, optimism that the Chinese economy could be turning a corner after stuttering growth in recent months is also helping to buoy the oil prices. Retail sales and industrial production data last week came in stronger than forecast.

This week, attention will be on the central bank rate decisions for clues that rate hiking cycles are close to concluding, which could support oil prices. Meanwhile, signals of more hikes could pressure the price of oil.

Stockpile data from the API is due later, and EIA data is due tomorrow.

WTI crude trades +0.6% at $91.34

Brent trades +0.6% at $94.05

Looking ahead

21:30 API oil inventories

 

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