Dow Jones Forecast: DJIA rises to record high after the Fed boosts rate cut bets

US futures

Dow futures 0.45% at 39690

S&P futures 0.47% at 5250

Nasdaq futures 1% at 18420

In Europe

FTSE 1% at 7870

Dax 0.48% at 18101

The Fed boosted rate cut bets & still sees 3 cuts this year
Jobless claims fell to 210k, down from 215k
Chip stocks rally after Micron Technology results
Oil holds steady

Record highs as Fed boosts rate cut bet expectations

U.S. stocks are set to open higher, building on yesterday’s record close as investors continue to digest the latest Federal Reserve interest rate decision and more signs of a soft landing as jobless claims fall.

As expected, the Fed left interest rates on hold at 5.25% to 5.5%. While Fed Chair Powell warned over sticky inflation and revised its PCE projection upward, the central bank maintained its guidance of three interest rate cuts this year. The fact that the Fed didn’t downwardly revise the dot plot suggests that policymakers are not sufficiently alarmed by two straight months of hotter-than-expected inflation.

Interestingly, the Federal Reserve is sticking to the three rate cuts despite upwardly revising its PCE forecast for year-end to 2.6% from 2.4%. This, in effect, lowers the bar for a June rate cut, making it possible even if inflation is hotter.

Following the meeting, the market was pricing in a 75% probability that the Fed would kick off the rate-cutting cycle in June, up from 60% just ahead of the meeting.

Separately, US jobless claims came in stronger than expected at 210K, down from 212 K, and defying expectations of rising to 215k. The data supports the view that the US jobs market remains resilient despite 22-year high-interest rates.

Attention will now turn to PMI data, which is expected to confirm that business activity expanded at a slightly slower pace. This would support Federal Reserve chair Powell's view that the US economy is still heading for a soft landing.

Corporate news

Micron Technology is rising after passing stronger-than-expected Guidance for the current quarter and pasting a surprise profit in fiscal Q2, benefiting from increasing demand from the AI industry.

Reddit will start trading today on the NYSE after IPO’ing at $34, the top end of its guided price range. The IPO was ten times oversubscribed.

Apple is set to go to full pre-market after Bloomberg reported that the Department of Justice plans to sue it for potentially violating antitrust laws.

Dow Jones forecast – technical analysis.

The Dow Jones broke out of its holding pattern yesterday and scaled to new all-time highs. The bulls are pushing for further record highs as the price rises towards 40,000 at the psychological level and the rising trendline resistance dating back to late October. Near-term support is at 39,284, the previous record high.

FX markets – USD rises, GBP/USD falls

The U.S. Dollar is rising, recovering some of yesterday’s losses after the Fed's interest rate decision. Expectations of a soft landing are supporting the USD.

EUR/USD is falling towards 1.09 despite signs that the eurozone economy could be bottoming out. The composite PMI rose to 49.9 in March, up from 49.2 in February and ahead of the 49.5 forecasts. Strength in the service sector is driving gains, while the manufacturing sector contracted at a slightly faster pace.

GBP USD is falling after the Bank of England left interest rates on hold at 5.25% as expected. However, the vote split was more dovish, with no policymakers voting to hike this time. Eight voted to keep rates on hold, and one policymaker voted to cut rates. The statement said things are moving in the right direction to cut rates, but they are not there yet.

Oil steadies as oil inventories fall

Oil prices are holding steady on Thursday after falling 2% in the previous session but are still on track for modest gains this week.

Crude oil inventories in the US fell for a second straight week. According to the EIA report, stockpiles unexpectedly declined by 2 million barrels in the week ending March 15, supporting the bullish outlook. Gasoline inventories also fell for a seventh straight week, down 3.3 million, suggesting strong fuel demand ahead of the US driving season.

Meanwhile, the Federal Reserve's decision to keep interest rates on hold at 5.25% and maintain guidance for three rate cuts this year will support the demand outlook as lower interest rates lift economic growth.

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