Dow Jones Forecast :Stocks rise cautiously ahead of Powell

Congress building
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures -0.53% at 33810

S&P futures -0.75% at 4340

Nasdaq futures -0.76% at 14999

In Europe

FTSE -1.17% at 7590

Dax -0.87% at 15099

  • US 10 year yields steady below 5% ahead of Powell’s speech
  • Netflix jumps on soaring subscriber numbers
  • Tesla tumbles after missing earnings and revenue forecasts
  • Oil eases as Venezuelan sanctions are relaxed

Yields steady below 5% ahead of Powell’s speech

U.S. futures are heading cautiously higher as treasury yields of multi-year highs ahead of a speech by Federal Reserve chair Jerome Powell and as investors digest the latest earnings on Wall Street.

Yields on the 10-year treasury yield hold steady, just below the key 5% level last seen in 2007. Investors are looking cautiously ahead to Federal Reserve chair Jerome Powell, who is due to speak at the New York Economics Club and are unlikely to take any big positions until he has spoken.

His comments come after several Fed policymakers pointed to a pause in rate hikes for a couple of months in order to understand the central bank’s progress in the fight against inflation. But even if the Fed doesn't raise rates, any sense of a dovish pivot could still be a long way away. With inflation rising and the US economy proving resilient, Fed Powell could reiterate his stance of higher rates for longer.

According to the CME Fed watch tool the market is pricing in a 94% probability that the Fed will leave rates unchanged in November and a 61% probability that the Fed will leave rates unchanged in December.

On the data front, weekly jobless claims came in below 200,000, signalling a tight labour market. Initial jobless claims were down from 212,000 to 198,000.

Corporate news

After impressing with its quarterly numbers, Netflix is set to jump over 13% higher on the open. The streaming giant's password-sharing crackdown increased subscriber numbers by 8.8 million, well ahead of the 6.6 million forecast. While beating on EPS and revenue, Netflix said it would raise subscription prices in some regions.

Tessa points to a 7% fall on the open after disappointing numbers, which saw it miss EPS and revenue forecast after the EV makers’ recent price cuts weighed on margins. Gross margins, excluding credits, slowed by 16.1%, down from 18.7% in the previous quarter.

Quarterly earnings continued today with results also from American Airlines. AT&T and Philip Morris

Dow Jones forecast – technical analysis.

The Dow Jones fell below the 200 sma and is testing support of the 20sma around 33620, which is also the Jne and July low. Sellers will look for a break below here to open the door to 33300, the September low, before bringing 32800 into focus. Should the 20 sma support hold, buyers will look to test the 200 sma at 33850 to bring 34150 the October high into focus.

dow jones forecast chart

FX markets –USD rises, GBP falls

The USD is Fooling despite rising treasury yields and as attention turns to Federal Reserve chair Powell's speech.

EUR/USD is rising, capitalising on the weaker U S dollar and recovering from early loss earlier losses. The eurozone economic calendar is quiet leaving the US dollar as the major influence in the pair.

GBP/USD is falling for a third straight day amid concerns that sticky inflation and high interest rates will cause a more pronounced economic downturn in the second half of the year. Yesterday UK CPI came in unchanged at 6.7%. This contrasts with the US economy, which is showing resilience.

EUR/USD +0.3% at 1.0558

GBP/USD -0.06% at 1.2134

Oil falls as Venezuelan sanctions are relaxed

Oil prices are falling after two days of games as the US eases sanctions on Venezuela, increasing supply but as fears remain over an escalation intention of tensions in the Middle East.

The US issued Venezuela with a six month licence authorising transactions its energy sector. The move comes as Venezuela’s government and political opposition reached a deal to ensure a fair 2024 election. Venezuela's output is not expected to ramp up rapidly however the prospect of more oil supply in a tight market is putting downward pressure on prices. Oil had fallen as much as 2% earlier in the session but has pared some of those losses.

Meanwhile the conflict in the Middle East remains in focus as do concerns over potential supply disruption after Iran called for an oil embargo on Israel over the conflict in Gaza. OPEC is not planning to take any immediate action. It would take a de-escalation of tension to see oil prices fall significantly.

WTI crude trades -0.74% at $86.60

Brent trades +1.6% at $89.90

Looking ahead

15:00 US existing Home Sales

17:00 Fed Chair Powell speaks

21:00 Fed Bostic speaks



Related tags: US Open Trade Ideas USD Oil

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