Dow Jones Forecast: DJIA slips amid a cautious mood ahead of this week's FOMC meeting

20231218 - 001 - 01
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow future -0.14% at 38,720

S&P futures -0.17% at 5336

Nasdaq futures -0.24% at 18950

In Europe

FTSE -0.46% at 8217

Dax -0.79% at 18413

  • US stocks set to extend Friday’s NFP-inspired losses
  • US CPI & FOMC data in focus this week
  • Apple’s developer conference kicks off
  • EUR/USD drops on French snap election news

Stocks slip ahead of this week’s FOMC meeting

U.S. stocks are pointing to a weaker open, extending losses from Friday amid cautious trade ahead of a key week with the Federal Reserve interest rate decision and inflation data due.

While stocks gained last week, they fell on Friday following US non-farm payroll data that smashed economists' forecasts, resulting in the market reining in rate cut expectations.

Markets are widely expecting the Federal Reserve to keep interest rates on hold at a 22-year high on Wednesday, meaning the focus will be very much on its outlook for the future path of rates. Attention will be very much on the dot plot, which is expected to show officials are now projecting two 25 basis point cuts this year, down from three in March.

Heading toward Wednesday's inflation data and FOMC rate decision, the market is pricing under a 50% probability of a rate cut in September, down from 70% ahead of last week’s jobs report.

Corporate news

Apple is set to open higher, adding to Friday's gains, as attention turns to its worldwide developers conference, which starts later today. The market will be hoping to gain further insight into how it's integrating artificial intelligence across its software suite.

GameStop is set to open over 7% percent higher, recovering from Friday's 40% drop in the wake of a big Q1 sales miss and as volatile trading in the meme stock continues.

Southwest Airlines has soared 9% after the Wall Street Journal reported that activist investor Elliott Investment Management has built a nearly $2 billion stake in the carrier and intends to push for change.

Nvidia is trading lower after the 10-for-1 stock split that went into effect after the market closed on Friday, sparking chatter surrounding its inclusion into the Dow Jones.

Dow Jones forecast – technical analysis.

The Dow Jones is hovering on the 100 SMA as it trades caught between 38550 and 39100, last week’s high. The RSI is neutral, giving away a few clues. Buyers will look to extend the recovery from 38000, the May low, which could open the door towards 40,000. Sellers will look to take out 38550 to extend losses toward 38000, the May low.

dow jones forecast chart

FX markets – USD holds steady, EUR/USD falls

The USD is inching higher, extending gains from Friday after the strong US nonfarm payroll resorts or the market pushed back rate cut expectations. The market is now turning to the FOMC meeting on Wednesday.

EUR/USD has fallen sharply to 1.0750 after the EU Parliamentary elections at the weekend, which saw the euro-skeptic right wing perform well. However, it was the surprise snap election called by French President Maron after his poor performance that raised political uncertainty in the region. The election will be held later this month, at a time when the Olympics will also be taking place.

GBP USD is holding steady above 127 amid a quiet day for UK economic data. Furthermore, all public appearances from Bank of England policymakers have been canceled ahead of the July 4 general election. UK labour market data is due tomorrow after US jobs data smashed forecasts on Friday.

Oil rises after 3-weeks of losses

Oil prices are inching higher after three straight weeks of decline amid rising optimism about fuel demand this summer. However, receding expectations of US rate cuts have capped the gains.

While markets started the week off higher, a bearish sentiment persists. Oil slumped last week on concerns over OPEC+ unwinding some production cuts, combined with strong U.S. data, which raised concerns over the Federal Reserve keeping interest rates high for longer.

Looking ahead, OPEC+ is set to release its monthly report on Tuesday, and the annual crude demand outlook will be the topic. The International Energy Agency is also due to release its monthly report this week.

Related tags: US Open USD Dow Jones Oil

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