Dow Jones Forecast: DJIA flat ahead of tomorrow's inflation data

20231218 - 001 - 01
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures 0.09% at 38944

S&P futures 0.26% at 5220

Nasdaq futures 0.5% at 18189

In Europe

FTSE 0.5% at 7940

Dax -0.49% at 18321

  • Stocks are broadly flat for a second day
  • US CPI is forecast to rise to 3.4% YoY from 3.2%
  • Oil holds steady; API data is due later

US inflation data in focus

US stocks are pointing to a quiet open after a flatline finish on Monday in cautious trade ahead of tomorrow's inflation data.

Traders are sitting on the sidelines, with few prepared to take on big positions ahead of tomorrow's critical figures. This could provide further clues about the Fed's ability to cut rates in 2024.

Inflation is expected to tick higher in March to 3.4% YoY, up from 3.2% in February, highlighting the sticky nature of consumer prices at the start of this year.

Tomorrow's data comes as the market continues to weigh up the likelihood of a June rate cut. According to the CME Fed watch, the market is pricing at a 50/50 chance of the first rate cut coming in June. The market has also downwardly revised the scale of rate cuts expected this year to 65 basis points, down from 75 basis points just a few weeks earlier.

Amid a quiet economic calendar, attention is on Fed speakers today. During last week, several Fed speakers raised concerns over the Fed's ability to cut rates at all in 2024; this week, policymakers are more supportive of the Fed achieving three cuts before the end of the year.

Corporate news

BP ADRs are set to rise after the oil major upwardly revised upstream production for both oil and gas.

Coinbase is set to open lower as it continues to track volatility in the cryptocurrency market. Bitcoin trades down 1%.

Tilray, the cannabis growing firm, is set to plunge over 10% on the open after reporting a larger expected loss in its fiscal Q3 and after revenue also came in below expectations.

Dow Jones forecast – technical analysis.

After recovering from 38550, the April low, the Dow Jones is holding steady at around 39000. Buyers will look for a break out above 39284, the February high, to extend gains towards 40,000. Meanwhile, sellers will look for a break below 38550 to bring 38265, the February low, into focus.

FX markets – USD falls, EUR/USD rises

The USD is drifting lower in cautious trade ahead of tomorrow's inflation data and the minutes of the latest FOMC meeting. Investors are sitting on the sideline ahead of the date, which could impact the feds next to me.

EUR/USD is rising cautiously after the ECB bank lending survey showed that the picture was improving, but only very slowly. Demand for loans remains slow, suggesting that investment levels will remain weak as policy stays restrictive. That comes ahead of the ECB interest rate decision on Thursday when the central bank is expected to leave rates on hold at 4% and signal a cut in June.

GBP/USD is rising after encouraging retail sales data from the British Retail Consortium. Sales rose to an 8-month high after strong spending across Easter. Retail sales, which are not seasonally adjusted, rose 3.2% year on year in March, smashing forecasts of a 1.8% increase.

Oil steady ahead as a ceasefire looks unlikely for now

Oil prices are flat as hopes of a truce in the Middle East diminish.

Ceasefire talks between Israel and Hamas in Cairo appeared to be breaking down with no signs of an agreement. Comments from Israel's Prime Minister Benjamin Netanyahu regarding further attacks suggest that any deal is a long way off.

Without a ceasefire, the risk of Iran becoming more involved in the conflict remains high. Iran is OPEC's third-largest oil-producing nation, and their involvement in any war could impact supply. As a result, the risk premium on oil is rising again, which supports the higher long-term trend.

Meanwhile, the demand side remains upbeat after data yesterday showed that Indian demand was at a record high. Figures last week also showed that Chinese manufacturing activity returned to growth, supporting the demand outlook for oil.

API stockpile data is due shortly, and a larger-than-expected draw could help oil prices further.


Related tags: USD Oil Dow Jones US Open

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