Dow Jones Forecast: DJIA tumbles as Oil hits $100

US futures        

Dow futures -0.50% S&P 500 futures 0.3%  & Nasdaq futures  0.53%

European futures

FTSE 0.09%,  DAX  1.36%

• US stocks fall as oil breaks above a key psychological level
• Rising oil prices lifts inflation concerns
• September Fed rate hike expectations are 60%
• Oil rises aboce $100

Stocks fall as oil and inflation concerns rise

U.S. stocks are pointing to a lower open as oil prices breach $100 a barrel for the first time since July, amid deepening tensions in the Middle East. Investors also remain cautious ahead of inflation data later in the week.

With oil rising, inflationary concerns are building, lifting Treasury yields ahead of this week’s inflation data and the Federal Reserve’s rate decision next week. Following Friday’s strong non-farm payroll report, the market is now pricing in a 60% probability that the Fed will hike rates in September, raising concerns that higher borrowing costs could dampen market sentiment and risk appetite.

The Treasury Department will also announce the size of a buyback operation targeting long-dated U.S. debt, following the plan announced last month.

The department is expected to announce the size of the buyback operations around 11am ET, in an aggressive move aimed at keeping a lid on Treasury yields and ensuring markets function as intended. The announcement comes after Secretary Scott Bessent said, “I am the house,” referring specifically to his parallel manoeuvre to support the Japanese yen.

Both the 10-year and 30-year Treasury yields have edged higher since Bessent’s plans for the bond market intervention were announced last month.

Corporate Movers

Energy stocks are pushing higher as Brent crude tops $100 a barrel. The XLE ETF, which tracks the S&P 500 energy sector, gained around 1% before the bell.

Apple shares are slightly lower as traders await an event where the company is expected to announce new iPhones, including a foldable model.

Dow Jones Forecast – Technical Analysis

The Dow Jones has broken below its rising trend line support and its 50 EMA which, combined with the RSI below 50, keeps sellers hopeful of further downside.

Sellers will look towards 52,000, the round number, and the 100 EMA at 51,830 before turning attention to 51,500, the July low. A break below here exposes the 200 EMA at 50,200.

Any recovery would first need to rise above the 50 EMA at 52,800, stabilising the price action before attention turns to 53,800, the August high. A rise above here would bring attention back to 54,750 and fresh record levels.

FX Markets – Dollar Falls, EUR/USD Rises

The USD is falling further on Wednesday, sliding for a third straight session to its weakest level in four months, owing to the yen’s rapid rise.

U.S. Treasury Secretary Scott Bessent has warned traders against betting against the currency, suggesting he has good insight into what the BoJ will do when making a decision on interest rates and intervening in the yen.

EUR/USD is rising towards 1.1500 on U.S. dollar weakness as investors look to tomorrow’s ECB rate decision, where the central bank is expected to hike rates by 25 basis points. A hawkish tone from the central bank could pave the way for further rate hikes this year and provide additional support to the euro.

GBP/USD is edging higher amid U.S. dollar weakness as the market digests Bank of England Governor Andrew Bailey’s mixed message in front of the Treasury Select Committee yesterday.

Bailey warned that risks to inflation remain on the upside, owing to renewed hostilities in the Middle East, which have sent energy prices higher, while food prices are also expected to continue rising. However, he also pushed back against the idea that rate hikes are inevitable.

Oil Hits $100 

Oil prices are rising, with Brent topping $100 a barrel for the first time in six weeks, as an escalation in hostilities between the U.S. and Iran deepens concerns over supply from the region.

The rise in oil prices has accelerated this week, with Brent now trading around 10% higher in September following renewed attacks on Saudi energy facilities, increasing disruption across the wider Gulf.

The global market is showing signs of becoming increasingly concerned over supply losses due to restrictions through the Strait of Hormuz and inventory drawdowns. The move has accelerated further as hopes of diplomacy fade.

Unless the Strait of Hormuz reopens and oil starts flowing again, oil prices are likely to continue creeping higher. The key risk for markets is that sustained oil prices above $100 reinforce inflation expectations, putting further pressure on Treasury yields and Fed rate expectations at a time when investors are already focused on this week’s inflation data.