S&P500 Forecast: Stocks rise ahead of FOMC minutes, PPI data

Congress building
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures +0.3% at 33850

S&P futures +0.1% at 4372

Nasdaq futures 0.46% at 15200

In Europe

FTSE +0.12% at 7643

Dax +1.4% at 15441

  • FOMC minutes come after dovish Fed commentary
  • PPI expected to rise 0.3%MoM in September vs 0.7% in August
  • Birkenstock to price at $46 per share
  • Oil edges lower for a second day

FOMC minutes come after dovish Fed commentary

U.S. Futures are inching higher as treasury yields ease and investors look ahead to the minutes from the September Federal Reserve policy meeting, as well as PPI data.

The minutes come from the September meeting, where policymakers left interest rates unchanged but signaled to another rate hike before the end of the year. The minutes will be watched closely, particularly in light of recent fed commentary where officials have adopted a less hawkish stance.

Yesterday, Atlanta Fed president Raphael Bostic indicated that the Fed didn't need to raise rates again, and Neel Kashkari echoed his views. However, today, Federal Reserve Governor Michelle Bowman supported another rate hike from the Fed, noting that inflation remains well above the Fed’s 2% target.

Prior to the release of the minutes, attention will be on US PPI data, which is expected to show a rise of 0.3% MoM in September after rising 0.7% MoM in August. Hotter than expected PPI could reignite hawkish Fed bets.

US treasury yields have eased owing in part to the safe haven flows stemming from the war in the Middle East and owing in part to dovish remarks from Federal Reserve officials across the week. According to the CME fed watch tool, the market is pricing in an 86% probability the rates will remain unchanged in November and a 72% probability that rates remain unchanged in December.

Corporate news

Exxon Mobil will be in focus and is expected to announce today that it will purchase rival Pioneer Natural Resources in a deal worth $60 billion. This would mark the largest acquisition by any company so far this year. Exxon is expected to make a pure stock offer valued at over $250 a share for Pioneer.

Birkenstock will start trading today with a reported IPO price of $46 per share, which is in the middle of the $44 to $49 target range. This would see the listing raise $1.48 billion and give Birkenstock a valuation of $8.64 billion.

S&P500 forecast – technical analysis.

The S&P500 has extended its recovery from 4200 the October low, running into resistance at 4385. The bullish crossover on the MACD supports further gains. This is the level that buyers will look to rise above in order to extend the recovery towards 4410, the 50 & 100 sma. A rise above here brings 4550 the September into focus. Support can be seen at 4340, the August low, with a break below here opens the door to 4300 the round number.

S&P 500 FORECAST CHART

FX markets –USD rises, EUR holds steady

The USD is edging high after two days of losses as investors continue to digest mixed commentary from Federal Reserve officials. Attention is now turning to US PPI and FOMC minutes later today.

EUR/USD is holding steady as investors digest the latest German inflation data. German consumer prices cooled to 4.5% YoY in September, down from 6.1% in August. The data supports the view that the ECB is at the end of its hiking cycle. Concerns over the economic outlook for Germany remain after the IMF downwardly revised growth in the eurozone's largest economy to -0.5% this year.

GBP/USD is holding steady as investors await key inflation data from the US and the minutes of the September policy meeting. UK data is in short supply. Industry figures showed that vacancies in the UK fell for the first time in two years, suggesting that the labour market is starting to cool. The Bank of England could keep this in mind when considering whether to raise interest rates at the November meeting.

EUR/USD +0.06% at 1.0587

GBP/USD +0.02% at 1.2246

Oil eases after yesterday’s jump

Oil prices are inching lower for a second straight day but still hold on to the majority of Monday's gains, suggesting that oil supply concerns remain a key focus.

Oil rallied over 4% at the start of the week on concerns that military clashes between Israel and Palestinian militants could escalate into a wider conflict. However, oil prices have retreated slightly as an immediate supply disruption looks unlikely. Still, oil prices could well push to $100 a barrel if the situation escalates further.

Elsewhere, investors will look ahead to the FOMC September policy meeting minutes for further clues on future right decisions recent speeches from fed officials have suggested that the bank may not raise borrowing costs further this year.

WTI crude trades -0.3% at $84.30

Brent trades -0.3% at $86.82

Looking ahead

13:30 US PPI

15:15 Fed Waller speaks

19:00 FOMC minutes

 

 

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