Nasdaq 100 Forecast: Stocks fall as Fed meeting comes into focus

US futures

Dow futures -0.06% at 34595

S&P futures -0.13% at 4444

Nasdaq futures -0.29% at 15156

In Europe

FTSE -0.61% at 7678

Dax -0.92% at 15755

• The market mood is cautious as Fed week kicks off
• Chipmakers trade lower on demand concerns
• UAW strike continues
• Oil extends gains towards $93

A cautious mood as Fed week kicks off

US stocks are set to open modestly lower amid a cautious market mood as investors look ahead to the Federal Reserve interest rate announcement on Wednesday and as chip stocks extend losses..

The US central bank is widely expected to keep interest rates on hold at 5.25% to 5.5% at the September meeting but could maintain a hawkish stance, particularly given that US inflation came in hotter than expected in August.

US CPI posted the largest jump in 14 months last month and rose for a second straight month. However, this was largely down to higher petrol costs. Core inflation cooled to its slowest pace in almost two years.

While the Fed could point to another interest rate hike before the end of the year, the market is less convinced that they will carry this through. According to the CME Fed watch tool, the market is pricing in a 70% probability that rates will remain unchanged again in November.

Today, the US economic calendar is quiet. Investors will be looking for progress in talks to avoid U.S. government shutdown.

Corporate news

General Motors and Ford will be in focus as talks are set to resume with the United Auto Workers Union later today. Negotiators seek to end one of the most crippling strikes in decades, which has stopped production in three plants in Michigan, Ohio and Missouri. Workers turned down a 21% pay increase off.

Chipmakers will also be in focus after reports that Taiwanese chipmaker TSMC has asked major suppliers to delay deliveries, raising demand concerns across the sector. The worries overshadowed Arm IPO optimism, sending the stock lower on its second day of trading. Arm is set to open lower again today.

Nasdaq 100 forecast – technical analysis.

The Nasdaq ran into resistance at 15520 last week, the falling trendline resistance, rebounding lower. The price fell below the 20 & 50 sma and is extending losses towards 15070 the multi-month rising trendline. The RSI supports further downside. A fall below the trendline exposes the 100 sma at 14830 and 14550 the August low. Meanwhile, buyers could look for a rise above 15325 the 50 sma and 15520 last week’s high to extend gains towards 15630, the September high.

FX markets –USD falls, GBP rises

The USD is easing away from a six-month high reached last week when the U.S. dollar index rallied for a ninth straight week. While US inflation came in hotter than expected the Federal Reserve is expected to pause interest rate hikes in September but could maintain a hawkish stance, pointing to another rate hike before the end of the year.

EUR/USD is edging higher after falling last week for a ninth straight week, the longest losing run for the euro since its inception in 1999. The euro fell despite the ECB hiking interest rates for a tenth straight meeting to a record 4%. However, the market is convinced that this could be the last hike from the central bank in the current hiking cycle, ECB speakers today have painted a mixed picture with ECB's De Guindos saying the worst of underlying inflation has passed.  However, ECB policymaker Kazimir said that further rate increases can't be ruled out.

GBP/USD is edging higher after losses last week but continues to hover around a three-month low. Attention is firmly on the BoE interest rate decision, which is set to be announced on Thursday. Inflation data tomorrow could provide some guidance over what to expect. Although inflation is set to remain well above the central bank’s target level, expectations are for the BoE to raise interest rates by 25 basis points. This could be the final rate hike this cycle, and any hints towards this could send the pound significantly lower.

EUR/USD +0.06% at 1.0667

GBP/USD +0.04% at 1.2385

Oil rises towards $93

Oil prices are heading higher at the start of the week, extending gains from the previous week, with investors focused on the prospect of a widening supply deficit in coming quarters.

Given Saudi Arabia and Russia's extended supply cuts and expectations of robust demand from China, the oil market is expected to see around a 2 million barrel per day deficit in the last few months of the year.

While the Chinese economy has seen a slowdown in recent months, last week's better-than-expected industrial production figures and retail sales, as well as a series of stimulus measures from authorities in China, have raised optimism that the economy of the world’s largest oil importer could be turning a corner. Furthermore, data showed that Chinese refineries ramped up output in August to a record high, up almost 20%.

This week, eyes will be on the central banks’ interest rate decisions as well as economic data out of China for further clues over the demand outlook.

WTI crude trades +0.6% at $90.68

Brent trades +0.6% at $93.86

Looking ahead

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