Key Insights
- Stock futures saw modest declines ahead of the Federal Reserve’s policy decision on interest rates, with expectations of a somewhat hawkish stance from Chair Jerome Powell.
- Recent after-hours trading activity featured notable stock movements, including Yum China Holdings and Match Group registering declines, while Advanced Micro Devices saw positive results.
- Technical analysis shows a bearish trend for the S&P 500 Index, with minor resistance at 4,197.68 and support at 4,050.56.
Stock futures saw modest declines on Wednesday, with the market on edge ahead of the Federal Reserve’s imminent policy decision on interest rates, concluding a volatile month. The expectation is for Federal Reserve Chair Jerome Powell to adopt a somewhat hawkish stance, although not to a degree that would destabilize the stock market. An extreme move could potentially cause bond yields to plummet and create turmoil in the bond markets.
As of 08:45 GMT, Dow Jones Industrial Average futures were down 93 points, representing a 0.30% decline. Similarly, S&P 500 and Nasdaq 100 futures also registered approximately 0.30% decreases.
In recent after-hours trading activity, some notable stock movements have influenced investor sentiment. Yum China Holdings saw a sharp decline of 9.2% after missing Q3 revenue estimates, while Match Group shares dropped by 6.9% due to uninspiring Q4 revenue forecasts. On the positive side, Advanced Micro Devices managed to rebound, reversing earlier losses with better-than-expected earnings and revenue figures.
The primary focus, however, remains on the Federal Reserve’s policy decision. Current CME FedWatch data suggests a more than 99% probability that interest rates will remain unchanged, providing little reason for traders to anticipate a rate adjustment.
Investors are closely watching for signals from Powell and the Federal Open Market Committee (FOMC) regarding future policy directions. Powell is expected to proceed with caution, as a hawkish tone could trigger a market sell-off, particularly given that Treasury yields are close to 16-year highs.
In addition, traders are analyzing other essential financial data. The Treasury Department is about to disclose details regarding its funding requirements, offering insight into how it plans to manage the $33.7 trillion national debt. This information comes just ahead of Friday’s nonfarm payrolls report and follows better-than-expected Q3 economic growth figures. Market participants are growing cautious due to rising long-term Treasury rates and lingering concerns about inflation.
Short-Term Forecast: Cautiously Bullish
The market appears to be cautiously optimistic. Traders expect Powell to reiterate a “proceed carefully” approach, easing concerns about immediate rate hikes. While no major policy shifts are anticipated, the overall sentiment is somewhat bullish, at least until the Federal Reserve provides more explicit signals regarding its future actions.
Traders may be looking to establish a support base. While this could lead to a gradual uptrend, a substantial upward movement may not occur until there is stability in the Middle East or the Federal Reserve clearly communicates that it has finished raising rates.
Technical Analysis
The S&P 500 Index (SPX) is currently trading at 4,193.81, situated below both the 200-day moving average at 4,242.13 and the 50-day moving average at 4,353.36. This indicates a bearish trend in the short and intermediate term.
The index is slightly below the minor resistance level of 4,197.68 but significantly above the minor support of 4,050.56.
In light of these factors, the prevailing market sentiment leans bearish, suggesting traders may opt for caution and consider protective measures in preparation for potential downside movements. Given the sustained decrease, it is advisable to allow a trend to develop further, unless one has a specific strategy for identifying market bottoms.