Dow Jones & Nasdaq 100 Steady as Fed Decision and Projections Loom

Japanese Trade Data Lifts Sentiment

Traders brace for market volatility as the Fed’s highly anticipated interest rate decision and economic projections loom. Japanese economic data drew interest early in the Asian morning session on Wednesday, September 17.

Japanese exports fell by just 0.1% year-on-year in August after sliding 2.6% in July. While shipments to the US tumbled 13.8%, stronger demand from Asia and Europe helped offset the decline. The resilience in overall exports indicated that US tariffs had not materially impacted overall global trade terms, lifting demand for US stock futures.

The Nikkei 225 rose 0.12% in morning trading, while the Hang Seng Index gained 0.44%.

Markets React: US Stock Futures Rise as Fed Decision Looms

US stock futures edged higher in morning trading on Wednesday, September 17, after pulling back from new highs overnight. The Nasdaq 100 E-mini rose 20 points, the S&P 500 E-mini gained 4 points, while the Dow Jones E-mini advanced 4 points.

August’s US retail sales report challenged bets on a 50-basis-point (bps) Fed rate cut, tempering demand for risk assets. Retail sales rose 0.6% month-on-month, mirroring July’s increase and underscoring resilient demand despite a cooling labor market.

According to the CME FedWatch Tool, the chances of a 50 bps Fed rate cut slipped from 5% on September 15 to 3.9% on September 16.

Will the Fed Trigger a Market Rally or Breakdown?

Later Wednesday, markets brace for the FOMC interest rate decision, the projections, and Powell’s press conference.

Economists expect the Fed to cut rates by 25 basis points. Unless there is a surprise 50-basis-point rate cut, the market focus will be on the Economic Projections.

While the labor market has cooled, inflation remains a bugbear, challenging a push for aggressive rate cuts. FOMC members must weigh the slowdown in job growth against the pace of rate cuts to support the labor market. Will FOMC members signal one or two further rate cuts in the fourth quarter?

The uncertainty over the Fed’s rate path capped the gains across US stock index futures in early trading.

A dovish 25 bps rate cut, with two further rate cuts penciled in for October and December, could signal a bullish outlook for rate-sensitive stocks. These include tech stocks, investing heavily in AI development.

Multiple rate cuts would sharply lower borrowing costs and boost earnings and share prices.

On the other hand, a 25-basis-point rate cut, without the two rate cuts signaled, could trigger a pullback.

The FOMC Economic Projections have historically triggered market volatility. For context, the Fed last cut rates on December 18, 2024, but projected a less dovish-than-expected Fed rate path through 2025. The Nasdaq Composite Index plunged 3.64% in response, underscoring the need for trader vigilance.

The Kobeissi Letter, citing JPMorgan research, noted:

“When the Fed cuts rates with the S&P 500 within 1% of an all-time high, it results in an average return of +15% over the next 12 months. Furthermore, according to our research, 1-month performance is more spotty, with stocks ending lower 50% of the time. History says near-term volatility after Wednesday’s rate cut will be a long-term buying opportunity.”

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

The morning gains affirmed the short-term bullish bias. However, momentum hinges on the FOMC’s rate decision, policy outlook, and Fed Chair Powell’s press conference. For traders, here are the key levels that could dictate market direction in the coming sessions.

Dow Jones

• Resistance: September 16 record high of 46,332 and then 46,500.
• Support: 46,000, 45,500, and then the 50-day EMA (44,964).

Nasdaq 100

• Resistance: September 16 record high of 24,647 and 25,000.
• Support: 24,500, 24,000, and the 50-day EMA (23,422).

S&P 500

• Resistance: September 16 record high of 6,697 and then 7,000.
• Support: 6,500 and the 50-day EMA (6,415).

September Outlook: Fed Takes Center Stage

Traders should closely digest the FOMC Economic Projections and consider Fed Chair Powell’s press conference. Beyond the Fed, US-China trade developments will continue to influence sentiment. These events could make or break the September rally. Follow our live coverage and consult our economic calendar.