S&P 500 Forecast :SPX extends rally above 4700 as Fed's dovish pivot arrives

Congress building
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures +0.59% at 37300

S&P futures +0.62% at 4735

Nasdaq futures +0.5% at 16634

In Europe

FTSE +1.1% at 7666

Dax +0.71% at 16883

  • Stocks surge as Christmas comes early from the Fed
  • Three rate cuts are forecast for next year
  • GBP/USD over 1.27 as BoE sticks to its hawkish stance
  • Oil rises on USD weakness 

The Fed's dovish surprise is well received

US stocks are set to extend gains as the markets react to the Federal Reserve's more dovish-than-expected meeting on Wednesday. Christmas came early for the stock markets as the Fed gave investors what they wanted.

The S&P 500 gained 1.4% on Wednesday, and the Dow hit an all-time high yesterday after the Federal Reserve left interest rates on hold, as expected, at 5.25 to 5.5%, but the medium dot plot now implies three rate cuts in 2024, up from two in the September meeting.

The Fed gave an inch in the market is taking a mile, and is now pricing in as many as six interest rate cuts by the Fed in 2024, sending yields lower and stocks higher.

The move by the Fed comes as inflation cools and data starts to show some signs of the economy cooling. The Fed could also be motivated by worries that a recession could be on the horizon if financial conditions aren't eased.

With the Fed's dovish pivot well and truly here, the U.S. central bank is giving the green light for stocks to rally into the end of the year. However, there is a sense that the market could be underestimating the risks that lie ahead in 2024.

Corporate news

Adobe is falling 3% premarket after reporting fiscal Q4 results. EPS came in at $4.27 ahead of consensus estimates of $4.13 and revenue grew 12% year on year to $5.05 billion. However, guidance was conservative, with revenue expected in the range of $5.1 to $5.15 billion, which was worse than the $5.19 billion forecast.

Occidental Petroleum is set to rise 2.2% after Warren Buffett’s Berkshire Hathaway acquired 10.5 million shares of the oil giant for $588.7 million.

S&P 500 forecast – technical analysis

The S&P 500 continues to power higher despite the run higher looking overextended. Buyers are heading towards 4745, ahead of 4817 the all-time high reached in January 2022. On the downside, a break below 4700 the daily low could open the door to 4635, with a fall below here negating the near-term uptrend and opening the door to 4600.


FX markets – USD falls GBP/USD rises

The USD is falling, extending losses after dropping 1% in the previous session. The move lower comes after the Fed's dovish pivot, with three rate cuts expected now in 2024.

EUR/USD is rising on USD weakness and after the ECB, as expected, left interest rates unchanged at 4%, a record high. The central bank also downwardly revised growth and inflation forecasts. Attention now turns to the press conference, which is due to start shortly.

GBP/USD has popped, and yields are rising after the Bank of England left interest rates on hold as expected at 5.25%, a fifteen-year high, but it gave no hints at when the first interest rate cut may come. BoE governor Andrew Bailey said that there was still more work to be done in order to tame inflation, which sits at over 2 1/2 times the central bank's target rate. His comments are in sharp contrast to market expectations, proving how little the market had been listening to BoE.

EUR/USD +0.54% at 1.0934

GBP/USD +0.78% at 1.2710

Oil steadies after steep losses

Oil prices are heading higher but are still on track for a weekly loss, which would mark the eighth straight weekly decline.

Oil is finding support today from a weaker U S dollar and after the International Energy Agency lifted its oil demand forecast for 2024.

The IEA forecasts global oil consumption increasing by 1.4 million barrels per day in 2024 up from 130K previously expected. The improved oil demand outlook comes amid an improving economic outlook for the US, the world's largest consumer of oil.

The move by the IEA comes after the OPEC forecast, which was released earlier in the week and was even more bullish.

Meanwhile, the US dollar has fallen sharply after the Federal Reserve indicated that it plans to cut interest rates three times in 2024. A weaker dollar makes buying oil cheaper 4 buyers of oil with foreign currencies.

Meanwhile, oil prices also found support from a larger-than-expected draw of US inventories. The EIA reported a 4.3 million barrel draw from stockpiles.

WTI crude trades +2.85% at $71.6

Brent trades +2.85% at $76.3


Related tags: US Open USD Oil SPX 500

Open an account today

Experience award-winning platforms with fast and secure execution.

Web Trader platform

Our sophisticated web-based platform is packed with features.
Economic Calendar