Dow Jones Forecast: DJIA rises as risk sentiment improves

US futures

Dow futures 0.8% at 38314

S&P futures 0.84% at 5166

Nasdaq futures 0.8% at 18165

In Europe

FTSE +0.03% at 7997

Dax 1.17% at 18163

• Iran – Israel tensions ease slightly as the US doesn’t support a retaliation.
• US retail sales rise, supporting a hawkish Fed stance
• Goldman Sachs rises as profits jump 28%
• Oil slips as the risk premium eases

Geopolitical risks steady & retail sales rise

US stocks are pointing to a higher open after steep losses across the previous week. The market mood is improving, although it remains cautious following Iran’s attack on Israel over the weekend. Concerns over a broader conflict in the Middle East have eased after the US said that it wouldn’t back a retaliation by Israel. Still, geopolitics will remain front and central this week, although the market hopes the worst is over.

Any sense of retaliation or further developments would impact risk sentiment.

Last week, the Dow Jones fell over 2.4% in its worst weekly performance since March 2023, and the S&P 500 dropped 1.5%, its worst performance since October. Investors digested escalating geopolitical escalations and feared that the Fed would keep rates higher for longer after hotter-than-forecast inflation.

Today, US retail sales highlighted the strength of the US consumer, with sales rising 0.7% MoM, up from 0.6% and defying expectations of just a 0.3% rise. The data doesn’t give the Fed any reason to start cutting rates soon.

Earnings season will ramp up this week with numbers from Bank of America and Morgan Stanley tomorrow and Netflix and Procter & Gamble later.

Corporate news

Goldman Sachs is set to open over 3% higher after posting a 28% jump in Q1 profits buoyed by a recovery in dealmaking and underwriting, which helped its investment bank unit. Goldman Sachs posted EPS of $11.58, up from $8.79 a year earlier. Revenue from trading fixed-income currencies and commodities rose 10%, and equity revenue jumped 10%.

Apple is set to fall into the open after losing its crown as the world's number-one phone maker. Apple shipments dropped 10% in Q1, while global smartphone shipments increased 7.8%. With a 20.8% market share, Samsung has regained the top spot from Apple. Apple comes in second with a 17.3% market share.

Tesla will also be under the spotlight amid reports that the EV maker could be about to announce large-scale redundancies as it struggles with worsening sales. The report comes after the TV giant posted sharp falling Q1 deliveries amid weakening demand and increased competition in China.

Dow Jones forecast – technical analysis.

After reaching almost 40000 at the start of the month, the Dow Jones has fallen sharply, dropping to a low of 37900 at the end of last week. The Dow Jones found support on the 100 SMA and around the February low. Buyers are attempting to push the price back up towards 38450, the March low, ahead of 39000, the round number. Meanwhile, sellers must take out the 100 SMA at 37900 to extend losses towards 37130, the 2024 low.

FX markets – USD rises, EUR/USD steadies

The USD has risen to a daily high following the retail sales data, which supports the view that the Federal Reserve will keep interest rates high for longer.

EUR/USD is struggling below 1.0650, just above a six-month low reached last week. The euro was pressured after the ECB signaled last week that it could cut rates in June, diverging from the Fed. Meanwhile, the eurozone's industrial production shows improvement, rising by 0.8% after falling by 3%. There's a sense that the manufacturing downturn in the region could be turning a corner.

GBP/USD is recovering from the 2024 low, pushing higher ahead of what's expected to be a busy week for the pound. Tomorrow, UK employment data will be followed by inflation figures later in the week, which could provide further clues as to whether the Bank of England will likely cut interest rates in June.

Oil slips as Middle East tensions ease

Oil prices are easing away from a five-month high reached last week as the market continues to watch geopolitical events in the Middle East closely.

Following Iran's attack on Israel over the weekend and the US saying that they don't support retaliation from Israel, the crisis is not expected to escalate to a point that creates supply disruption.

Considering this, the oil risk premium has fallen after rising sharply last week ahead of an expected attack.

Investors will be closely watching Israel's next move, and any developments in the region are likely to continue influencing the market.