US futures
Dow futures 0.51%, S&P futures -0.08% & Nasdaq futures -0.20%
In Europe
FTSE 0.47% & DAX 0.39%
- US stocks are mixed around record levels
- The Fed is expected to cut rates by 25 basis points
- Projections, Powell’s presser, and the dot plot are in focus
- Oil falls, but losses are likely to be limited
The Fed is expected to cut rates
U.S. stocks are pointing to a muted open after reaching fresh record highs yesterday, and as investors wait cautiously ahead of today's Federal Reserve rate decision.
The Nasdaq and the S&P 500 rose to record highs yesterday and trade 4% and 2.5% higher, respectively, across the month of September, which is typically a poor month for equities. This strength has come amid rising expectations that the Fed will resume its rate-cutting cycle this month.
The market is pricing in a 25 basis point rate cut, with some even expecting a 50 basis point reduction, as recent data has highlighted a softening in the US jobs market, even as inflation remains above the Fed's 2% target.
As the rate cut is priced in, attention will be on projections, Powell’s presser, and the dot plot, which back in June signaled 50 basis points worth of cuts before the year-end. With the market pricing in 70 basis points worth of cuts, investors will be looking for a reconciliation.
As far as the makeup of the FOMC board is concerned, Trump's appointment of Stephen Miran will make a decision; however, he has been clear that his decisions will be based on data and political pressure. Lisa Cook is also remaining on the Committee.
Should the Fed point towards further rate cuts across the year, it could help lift risk assets higher; non-recessionary rate cuts are a boon for risk assets. However, any sense of caution from the Fed amid signs of sticky inflation could pull stocks lower and boost the USD.
Corporate news
Nvidia falls 1% on reports that China's Internet regulator has found that the country's biggest tech companies are prohibited from buying Nvidia's AI chips.
Alibaba, the Chinese e-commerce giant, is rising over 2% after Chinese state media reported that the company has one major customer, China Unicorn, for its AI chips.
Netflix is rising over 1% on the back of an upgrade from Loop Capital. The firm said Netflix has won the streaming wars with strong content and higher, longer-term margin assumptions, upgrading it to a buy from a hold.
Nasdaq 100 forecast – technical analysis
The Nasdaq hovers around a record high of 24,385 reached yesterday. The RSI supports further upside while it remains out of overbought territory. 24,500 and 25,000 are the next logical targets. Support can be seen at 24,000, the August high, and below here at 23,500.
FX markets – US rises, EUR/USD falls
The USD is rising, recovering from a six-week low reached yesterday, as the Fed is expected to cut rates by 25 basis points, even as retail sales yesterday highlighted the resilience of the US consumer.
The EUR/USD is falling on USD strength after reaching a fresh 2025 high in the previous session. The power has been supported by diverging fed ECB bets. SCB left rates unchanged last week, and there are questions over whether the central bank will reduce rates again this cycle.
The GBP/USD is unchanged amid USD strength and after data showed that UK inflation remained sticky at 3.8% in August. The data cements expectations that the Bank of England will leave interest rates unchanged at 4% in the meeting tomorrow.
Oil falls, but losses could be limited
Oil prices are easing back after rising over 1% in the previous session. However, losses are likely to be limited amid ongoing concerns over supply.
Supply worries have risen as Ukrainian drones attack Russian oil infrastructure, signaling the country's willingness to disrupt supply. These supply concerns have lifted oil prices to multi-week highs.
Oil pipeline monopoly Transneft warned that Russia may need to cut output following the Ukraine drone attacks.
In addition to supply concerns, the market will be watching the Federal Reserve interest rate decision later today. Lower rates and borrowing costs support economic growth.
