S&P500 Forecast: SPX rises after the Fed inspired selloff

US futures

Dow futures 0.11% at 38184

S&P futures 0.53% at 4869

Nasdaq futures 0.72% at 17257

In Europe

FTSE -0.08% at 7637

Dax -0.03% at 16875

• Fed Chair Powell pushed back on a March rate cut
• US jobless claims & Challenger cuts in focus
• AMZN, AAPL, and Meta will report after the close
• Oil rises after steep losses yesterday 

Fed Chair Powell pushed back on a March rate cuts

U.S. stocks point to a higher open, rebounding from steep losses in the previous session after the Federal Reserve interest rate decision and ahead of more big tech earnings.

The three leading indices on Wall Street closed sharply lower on Wednesday after the Fed left interest rates on hold as expected but also dampened expectations for a March rate cut.

In the post-decision press conference, Powell said a rate cut as soon as March was not his base case scenario despite growing signs of cooling inflation. According to the CME Fed watch tool, the market is now pricing in just a 35% probability of a rate cut in March, down from 85% in late December. Instead, the market is almost entirely pricing in the first rate cut in May and a total of 4 consecutive cuts across the year.

Attention is now turning to US jobs data with initial jobless claims and challenger job cut figures in focus. Both readings were weaker than expected. These figures came after yesterday's ADP payroll report showed that fewer private jobs were created in January than expected, suggesting a weaker-than-forecast non-farm payroll report on Friday.

So far, the US labour market has held up well despite interest rates remaining elevated. Signs of a weakening jobs market could see the market raise expectations for rate cuts across the year.

As well as labour market data and Federal Reserve rate decisions, attention is also on big tech with Amazon, Apple, and Meta due to report after the close. The Nasdaq 100 underperformed its major peers yesterday, partly due to Microsoft and Alphabet hitting sentiment after both tech giants warned of rising costs needed to build out their AI capability.

Corporate news

Apple will report after the close. Q1 earnings are expected to show revenue rose less than 1%, but EPS is expected to rise 11.1%. Q1 earnings come after the Apple share price rallied 49% in 2023, better than the 44% return by the NASDAQ, but it was the worst performing of the FAANG constitutes. The market will watch for commentary on China, Apple's largest overseas market, as the country goes through a structural slowdown and faces tough competition from domestic Chinese smartphones. The earnings come after Apple faced three downgrades in January, which is rare for the stock.

Meta is due to report after the close, and its outlook on AI could overshadow its Q4 results. Wall Street expects Meta to report revenues of $39.1 billion with adjusted EPS of $4.82. CEO Mark Zuckerberg has previously said AI would be the most significant investment area for engineering and infrastructure this year. The market will be watching how much this could cost. The Meta share price has risen 155% over the past 12 months.

Amazon is also due to report after the close today and is expected to post a record quarterly revenue and a significant increase in income and earnings per share. Analysts' estimates for Q4 are revenue of $166.14 billion, with earnings per share at $0.83. A key focus will be on Amazon's cloud computing segment, which is, to some degree, a measure of Amazon's success in navigating the recent surge in AI and is still one of the company's fastest-growing business areas.

S&P 500  forecast – technical analysis

After running into resistance at the record high of 4931, the S&P500 rebounded lower and is testing the lower band of the rising channel. A break below here opens the door to 4800, the December high, which, if taken out, negates the near-term uptrend and brings 4700 into focus. Meanwhile, should the rising trendline support hold, buyers could look up toward 4930 for fresh all-time highs.

FX markets – USD falls GBP/USD rises

The USD is rising but has come off session highs as investors continue to digest the Federal Reserve interest rate decision where Fed chair Powell pushed back against the likelihood of a March rate cut.

EUR/USD is holding steady above 1.08 as inflation cooled in line with forecasts to 2.8% in January, down from 2.9%. Meanwhile, core inflation cooled by less than expected to 3.3%, down from 3.4%. The data raises questions over how soon the ECB will be able to cut interest rates.

GBP/USD is falling after the Bank of England left interest rates unchanged at a 15-year high of 5.25%. However, the pound has picked up off session lows as the votes split was more hawkish than expected, with two policy members still voting to raise interest rates as inflation in the UK remains sticky, double the Bank of England's 2% target level.

Oil rises after yesterday's losses 

Oil prices are increasing after losses in the previous session as concerns over the Middle Eastern supply are lifting both benchmarks.

News that OPEC oil output also saw its largest monthly decline in January as several members implemented new voluntary production cuts has also helped to lift the oil price.

OPEC produced 26.33 million barrels per day this month, down 410,000 bpd. The rise in oil comes after the price dropped sharply yesterday on concerns about the faltering Chinese economy and after an increase in US crude stockpiles.

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