Nasdaq Index, Dow Jones, S&P 500 News: Fed Decision, Inflation Data on Tap – Markets Cautious

James Hyerczyk
Updated: Jun 12, 2024, 12:51 GMT+00:00

Key Points:

  • Investors on edge before Fed meeting and inflation data. Market direction hinges on these key events.
  • Fed's "dot plot" and Powell's comments on labor market crucial for future rate hikes.
  • Upward surprise in inflation data could trigger sell-off. Dovish Fed on CPI confirmation may lead to rally.
Dow Jones, Nasdaq-100, S&P 500 Index

Stock Markets On Hold Ahead of Fed Decision and Inflation Data

Stock markets are in a holding pattern on Wednesday morning as investors await the Federal Reserve’s policy decision and the release of May’s consumer inflation data. While premarket trading shows some positive movement, overall sentiment is cautious until these key events unfold.

At 12:09 GMT, Dow futures are trading 38833.00, up 39.00 or +0.10%. S&P 500 Index futures are at 5390.25, up 6.25 or +0.12% and Nasdaq 100 Index futures are trading 19267.25, up 25.00 or +0.13%.

Premarket Movers Show Selective Buying

Despite the broader wait-and-see approach, certain stocks are attracting investor attention in premarket trading. Oracle (ORCL) jumped 9% after announcing cloud deals with Google and OpenAI, even though the company missed earnings expectations for the latest quarter.

Rubrik (RBRK) gained 3% after exceeding revenue forecasts for the first quarter. Rentokil Initial (RTO) climbed 7% following news that Trian Partners had taken a significant stake in the pest-control giant.

However, Paramount (PARA) dipped slightly, extending losses from the previous day after merger talks with Skydance fell through.

Focus on Fed Policy Meeting and Future Rate Trajectory

The main event for markets today is the conclusion of the Fed’s two-day policy meeting. While the market generally expects the Fed to maintain the current interest rate range of 5.25% to 5.5%, all eyes will be on the central bank’s updated economic projections and Chair Jerome Powell’s press conference. Investors are particularly interested in any changes to the “dot plot,” which reflects how Federal Open Market Committee (FOMC) members see future interest rates.

Recent strong jobs data and persistent inflation have raised concerns about a potential “higher-for-longer” interest rate environment. Additionally, traders will be attentive to any mentions of the labor market within the Fed statement or Chair Powell’s comments, given his previous suggestion that signs of weakening could prompt a shift towards easing rates.

DoubleLine Capital CEO Jeffrey Gundlach has added fuel to the fire, predicting the Fed’s dot plot will show only two rate cuts for 2024, down from the previously anticipated three.

Inflation Data Expected to Show Continued Moderation

Adding to the market’s wait-and-see approach is the release of May’s Consumer Price Index (CPI) data scheduled for Wednesday morning. Analysts forecast a slight increase of just 0.1% from April and a year-over-year rise of 3.4%. A confirmation of these projections could ease concerns about persistent inflation and potentially pave the way for a more dovish stance from the Fed. However, any significant deviation from expectations, particularly an upside surprise, could reignite worries about inflation and lead to a sell-off in risk assets.

Market Direction Hinges on Key Events

The overall market direction will likely hinge on the outcome of the Fed meeting and the inflation data. If the Fed maintains its current stance and the CPI report aligns with expectations, a sigh of relief could lead to a modest rally. However, any hawkish signals from the Fed or a hotter-than-anticipated inflation report could trigger a pullback. Traders are advised to remain cautious until these key events unfold and provide further clarity on the Fed’s monetary policy path and the state of inflation.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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