NASDAQ Index, SP500, Dow Jones Forecasts – Stocks Dive On Hawkish Fed

SP500 Retreats After Fed Decision

SP500 is losing ground as traders react to Fed decision and focus on updated FOMC Economic Projections.

Fed kept the federal funds rate unchanged, in line with analyst estimates. However, Fed changed the federal funds rate projection for 2026 from 3.4% to 3.8%.

Importantly, the federal funds rate projection for 2027 was raised from 3.1% to 3.6%. Put simply, Fed expects that rates will stay at high levels for the whole year 2027.

Fed projects that PCE inflation would reach 3.6% by the end of 2026.  Core PCE inflation would be 3.3%, compared to the previous estimate of 2.7%. Fed does not expect that inflation would return to its 2.0% target in 2027.

In his comments, Fed Chair Warsh said that the central bank would deliver on price stability.

Treasury yields rallied as bond traders reacted to changes in FOMC Economic Projections and focused on Warsh’s comments. The yield of 2-year Treasuries climbed above the 4.20% level, while the yield of 10-year Treasuries settled above 4.48%. The yield of 30-year Treasuries declined as traders bet that Fed will fight inflation. Rising Treasury yields put additional pressure on stocks.

Today, traders also had a chance to take a look at the Retail Sales report for May. The report indicated that Retail Sales increased by +0.9% month-over-month, compared to analyst forecast of +0.5%. Retail Sales Ex Autos grew by +0.8%, compared to analyst consensus of +0.5%. The better-than-expected report did not provide support to SP500 as traders focused on hawkish Fed.

Today’s pullback was broad, and most market sectors moved lower in today’s trading session. Consumer defensive and real estate stocks were under strong pressure as traders reacted to rising Treasury yields.

Currently, SP500 is trying to settle below the support at 7450 – 7460. In case this attempt is successful, SP500 will get to the test of the 50 MA at 7436. A move below the 50 MA will open the way to the test of the next support level at 7390 – 7400. RSI is in the moderate territory, so there is plenty of room to gain momentum in case the right catalysts emerge.

NASDAQ Is Losing Ground As Traders Focus On Hawkish Fed

NASDAQ pulled back as traders reacted to changes in Fed policy outlook. Global market reaction shows that traders did not expect that Warsh would be hawkish.

A successful test of the support level at 29,800 – 29,850 will push NASDAQ towards the 50 MA at 29,589. If NASDAQ declines below the 50 MA, it will head towards the next support level, which is located in the 29,250 – 29,300 range.

Dow Jones Tests Support At 51,600 – 51,700

Dow Jones moved away from historic highs amid broad pullback in the equity markets, which was triggered by Fed decision. Just three stocks in the Dow Jones index managed to gain some ground in today’s trading session.

From the technical point of view, Dow Jones attempts to settle below the support at 51,600 – 51,700. In case this attempt is successful, Dow Jones will move towards the next support level, which is located in the 51,000 – 51,100 range. It remains to be seen whether traders will rush to buy the dip as Warsh has surprised the market.

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