S&P 500 Forecast: SPX falls as the Fed's 2-day FOMC meeting begins

US futures

Dow future -0.14% at 38,730

S&P futures -0.17% at 5348

Nasdaq futures -0.27% at 19025

In Europe

FTSE -0.90% at 8150

Dax -0.79% at 18358

• Attention is firmly on tomorrow’s CPI data & FOMC rate decision
• No change to policy is expected
• Apple’s falls after a tepid response to its AI strategy
• Oil unchanged after the OPEC monthly report

Stocks slip in jittery trade

U.S. stocks point to a weaker open as jitters begin to show ahead of tomorrow's inflation data and as the Federal Reserve 2-day monetary policy meeting kicks off.

The FOMC meeting begins later today, and investors widely expect the US central bank to keep interest rates unchanged for the seventh straight meeting.

Attention will be on the Fed's new dot plot and its summary of economic projections, as well as Federal Reserve chair Jerome Powell's post-decision press conference, for clues about when the Fed may start cutting rates.

Expectations are for the Federal Reserve to lower its projections of three rate cuts this year, particularly in light of Friday's stronger-than-expected US payroll numbers and amid signs of sticky inflation.

Inflation data tomorrow are expected to show that the CPI remained at 3.4% YoY in May, and core inflation is expected to ease slightly to 3.5% YoY, down from 3.6%.

The market is currently pricing in under a 50% probability of the Fed cutting rates in September. Hotter-than-expected inflation combined with the downward revision to the dot plot could see the market push back rate cut expectations further.

Corporate news

Apple is set to open unchanged after falling yesterday as Apple's open AI partnership received a tepid response from Wall Street. The announcement made at Apple's annual developers conference showcased Apple's AI plans and revealed that Siri will harness open AI's ChatGPT.

General Motors' raise is set to rise 1% on the open after the board authorized a $6 billion stock buyback programme.

GameStop shares continued falling after dropping 12% in the previous session and 39% on Friday. The video game retailer posted wider-than-expected losses and after, a disappointing live stream from meme stock leader Keith Gill.

S&P 500 forecast – technical analysis.

On the 4-hour chart, the S&P 500 is consolidating below its all-time high. The index trades capped by 5376 on the upside and 5325 on the downside. Sellers will look to break down the 5325 level, exposing the 100 SMA at 5300. Below here, 5250 comes into focus. On the upside, buyers will look to rise above 5376 to fresh ATHs.

FX markets – USD rises, EUR/USD falls

The USD is rising, reaching a four-week high against its major peers. The markets are getting jittery ahead of tomorrow’s key data and Fed meeting.

 Euro USD is falling further, extending losses as investors continued to weigh up the news of a snap election in France, creating political uncertainty. Meanwhile, the euro is getting some support from comments from ECB chief economist Philip Lane, who said that the central bank should wait with the next rate move until uncertainty in the region eases.

GBP USD is falling today after UK jobs data showed that the labour market is starting to weaken. Unemployment unexpectedly ticked higher to 4.4%, up from 4.3%, its highest level since 2021. Wage growth was slightly weaker than expected at 6%; however, private sector wage growth, which is closely watched by the Bank of England, was weaker than expected at 5.8%, adding to optimism that wage growth was on the right trajectory to support the Bank of England cutting interest rates later this year.

Oil holds steady after OPEC’s monthly report

Oil prices are unchanged as investors digest OPEC’s latest monthly report. The oil group left oil demand growth forecasts unchanged for the second half of 2024, expecting oil demand to grow by  2.3 million barrels per day year on year in the second half of the year and by 2.2 million barrels per day in 2024 in total.

The group expects China to be the primary driver of non-OECD oil demand and forecasts demand to grow on average by 2.1 million barrels per day year on year in the second half of this year. The ongoing travel recovery and healthy driving levels, as well as improvements in manufacturing, are expected to support higher demand in the region.

Meanwhile,  OECD oil demand is estimated to increase by just 0.25 million barrels per day in the second half of this year, thanks mainly to the US and a healthy driving demand.