Dow Jones Forecast: Stocks struggle as peak rate optimism fades

US futures

Dow futures -0.18% at 34040

S&P futures -0.13% at 4360

Nasdaq futures +0.07% at 15169

In Europe

FTSE -0.04% at 7420

Dax -0.1% at 15124

• Uncertainty over the Fed’s interest rate outlook hits stocks
• Fed speakers remain in focus
• USD extends its recovery from a 6-week low
• Oil falls below $80 after weak China export data 

Uncertainty over the Fed’s interest rate outlook hits stocks

US stocks are set to open broadly lower after modest gains in the previous session as investors weigh up comments from Federal Reserve officials and look to more corporate earnings.

Optimism that the Fed could be at peak rates, which had boosted stocks sharply higher last week, has started to fade this week following comments from Federal Reserve policymakers.

Federal Reserve Bank of Minneapolis President Neel Kashkari said that the central bank likely had more work to do to control inflation, and he didn't consider that the bank had reached the end of its hiking cycle.

His comments come after the market perceived last week’s FOMC meeting to be a dovish tilt and after weaker-than-expected US non-farm payrolls supported the view that the Fed was close to ending its hiking cycle.

Little is happening on the US economic calendar today. However, several Fed officials are due to speak later today, ahead of two appearances by Fed Chair Jerome Powell in the coming days. The market will be watching closely for clues over where policymakers see interest rates going.

Corporate news

Uber is set for 1.5% after the ride-hailing company reported Q3 results that missed forecasts on both the top and bottom line owing to accounting changes. However, the forecast for booking and profits beat estimates, signalling strong demand for the ride-hailing and food-delivery business in the holiday season.

WeWork is set to jump 35% on the open after the co-working space provider files for bankruptcy in a New Jersey court. WeWork has struggled with the post-pandemic downturn in office occupancy.

Peloton are set to fall over 5% on the open after Deutsche Bank downgraded the exercise equipment company to hold from buy, given a lack of clarity in its grace outlook.

UBS is set to rise 2% after the Swiss banking giant saw $22 billion in net new money in its wealth management arm, helping soften the blow of a $785 million quarterly loss to cover the cost of taking on rival Credit Suisse.

Dow Jones forecast – technical analysis

The Dow Jones’s recovery ran into resistance at 34150, the October high, and the multi-month falling trendline. The price is currently trading caught between the falling trendline and the 200 sma. Sellers will look for a move below the 200 sma at 33845 to extend losses towards 33050 the October 4 low. Buyers will look for a rise above the falling trendline and 34150 to expose the 100 sma at 34300 and rise towards 35000.

FX markets – USD rises, GBP falls

The USD is rising for a second straight session after hawkish comments from Federal Reserve speakers yesterday. The US economic calendar is quiet today, but there are still plenty of Fed speakers whose comments on inflation or the future path for interest rates could influence the dollar.

EUR/USD is falling after German industrial production fell -1.1% MoM in September, well below the -0.1% forecast, highlighting the weakness in the sector. The data comes after German manufacturing PMI data earlier in the week showed that the sector was acting as a drag on the economy at the start of Q4.

GBPUSD is falling back to 1.23 after BoE’s chief economist Huw Pill said that the UK could see a rate cut in time for the election next year. His comments come as grocery inflation falls below double digits for the first time in 16 months.

EUR/USD -0.37% at 1.0677

GBP/USD -0.35% at 1.23

Oil falls below $80 after weak China data

Oil prices are falling and have dropped below the key $80 per barrel level as weaker-than-expected Chinese data, and the risk-off market mood overshadow concerns over oil supply.

Chinese exports dropped by 6.5%, significantly more than the 3.3% decline forecast. The data comes after weaker PMI data from China last week and raises concerns over the health of the Chinese economy, the world's largest oil importer.

This data overshadows Saudi Arabia and Russia reiterating their commitment to voluntary oil output cuts through to the end of the year.

Meanwhile, concerns that the Federal Reserve could keep interest rates high for longer could hurt the demand outlook in the US, the world's largest oil consumer.

API stockpile data is due later today.

WTI crude trades -1.9% at $79.25

Brent trades -2% at $83.47

Looking ahead

14:50 Fed Barr speaks

15:00 Fed Waller speaks

17:10 Fed Williams speaks

18:30 Fed Logan speaks