Dow Jones Forecast: Stocks rise ahead of a critical week

US futures

Dow futures +0.10% at 35257

S&P futures +0.18% at 4543

Nasdaq futures +0.25% at 15465

In Europe

FTSE -0.3% at 7641

Dax -0.13% at 16160

• Stocks rise with Wednesday’s FOMC decision in focus
• S&P PMI data due shortly
• Mattel rises after Barbie movie could boost Barbie sales
• Oil rises to a 2-month high 

Dow set for an 11^th straight winning session

US stocks are set to open higher ahead of a critical week for the markets. Not only will investors be digesting the latest FOMC rate decision, but this week sees over 50% of the S&P500 release results including big names such as Microsoft, Alphabet and Meta to name a few.

Arguably the most important event will be the federal reserve's interest rate decision on Wednesday where is expected to hike interest rates by 25 basis points in an attempt to call horse inflation. According to the CME the market is pricing in a 98% probability of a rate hike to 5.25 to 5.5%.

What happens next is last certain. While the market we'll be watching closely to see if the Fed will signal its intention to pause rate hikes or whether it will give itself the flexibility to react to future economic conditions.

Prior to Wednesday's rate decision today attention will be on the S&P PMI data which is expected to show that manufacturing contracted at roughly the same pace in July as in June, at 46.4. Meanwhile service sector PMI data is expected to slip to 54.1 from 54.4. Weak that expected PMI data could support the view that the Fed will pause rate hikes.

In addition to data, investors will digest the latest wave of earnings, which includes Chevron, ahead of big tech later in the week.

Corporate news

Mattel rises after Barbie movie became the highest grossing film so far this year domestically under the expected to translate into higher sales of Barbie dolls.

Chevron rises after posting better than expected profits in Q2. The company announced EPS of $3.08 and indicated that it was open to deal making.

Apple is rising after reports the tech giant is asking suppliers to produce around 85 million units of iPhone 15 this year. This would be approximately in line with the year before.

Dominos falls after missing second quarter revenue estimates as higher delivery fees and higher prices hit demand.

Dow Jones forecast – technical analysis

The Dow Jones rose to a high of 35370, the highest level since April 2022. The RSI has tipped into overbought conditions so buyers should be cautious. Bulls will look to rise above 35500 round number ahead of 35860 the February 2022 high. From here, 36000 could come into play. On the downside, support can be seen at 34500, the February and June high, which would negate the near-term uptrend.

FX markets – USD flat, EUR falls

The USD is holding steady after gains across last week. Investors are in a cautious mood ahead of Wednesday’s FOMC rate decision. While a 25 bps rate is expected, the market is not expecting further hikes this year. Will the Fed agree with the market?

EURUSD is falling weaker than expected data which showed that the composite PMI fell to 48.9 in July, down from 49.9 and deeper into contraction territory. German manufacturing plunged to 38.8 well below the 41 forecast. The data highlights slowing growth in the region which could dampen the prospect of a rate hike in September.

GBPUSD is falling after UK PMI data showed that the UK business activity grew at ther slowest pace in 6 months. The composite PMI fell to 50.7 from 52.8. Manufacturing was the weakest since May 2020 and inflation pressures were the lowest since February 2021. The data has seen investors trim BoE rate hike bets, pulling GBP lower.

EUR/USD -0.24% at 1.1095

GBP/USD -0.05% at 1.2850

Oil rises to a 2-month high

Oil prices are rising, adding to gains across last week, which marked the fourth straight week of gains. Oil is being supported by tightening supply conditions, optimism that the US economy could avoid a recession and by China stimulus measures.

Oil output cuts from Saudi Arabia and Russia mean tightening production conditions even as summer demand for gasoline and jet fuel has been stronger.

Meanwhile another US rate hike this week is expected. However, the market is also being supported by the prospect that this could be the last rate hike from the Fed in the current hiking cycle, which, combined with upbeat jobs data last week has boosted optimism that the US could avoid a recession.

Meanwhile in China more measures have been unveiled to support private investment in some sectors. Slowing growth in the world's largest oil importer has prompted authorities to step in with stimulus measures, keeping the oil demand outlook buoyed.

WTI crude trades +0.6% at $77.65

Brent trades  +0.45% at $81.27

Looking ahead

14:45 US S&P PMI data