NASDAQ Index, SP500, Dow Jones Forecasts – SP500 Tests 5700 As Fed Cuts Rates By 50 Bps

SP500

SP500 tested historic highs as traders reacted to Fed Interest Rate Decision. The central bank decided to cut the federal funds rate by 50 bps to 4.75 – 5.00%. Analysts expected that Fed would cut the federal funds rate by 25 bpd, so Powell was more dovish than expected. Importantly, Fed changed its interest rate projections for 2024, 2025, and 2026. This year’s federal funds rate projection was changed from 5.1% to 4.4%. The forecast for 2025 was reduced from 4.1% to 3.4%, while the projection for 2026 was cut from 3.1% to 2.9%. Fed expects that PCE inflation and Core PCE inflation will reach its 2.0% target in 2026. Interestingly, the central bank has raised its Unemployment Rate expectations and expects that Unemployment Rate will stay at 4.4% in 2024 and 2025. It looks that the significant changes in labor market outlook served as the key driver behind the decision to cut the federal funds rate by 50 bps.

SP500 has already pulled back from session highs. The dovish Fed may provide significant support to the market. However, traders may focus on labor market outlook, which signals that Fed expects an economic slowdown. From the technical point of view, SP500 needs to settle above the resistance at 5660 – 5680 to gain momentum.

NASDAQ

NASDAQ made an attempt to climb above the resistance at 19,500 – 19,600 but lost momentum and pulled back. Traders should focus on Powell’s press conference, which starts soon. Fed Chair’s comments will have a material impact on market dynamics.

If NASDAQ manages to settle above the 19,600 level, it will head towards the next resistance level, which is located in the 20,000 – 20,100 range.

Dow Jones

Dow Jones tested new highs as traders reacted to Fed decision. However, Dow Jones has pulled back after the initial move.

RSI is in the moderate territory, so there is plenty of room to gain momentum in case the right catalysts emerge. If Powell signals that traders should not worry about labor market outlook, Dow Jones will have a good chance to settle above the 42,000 level.

For a look at all of today’s economic events, check out our economic calendar.