US stock market closed generally higher overnight. In particular, DOW now stands just about 1% shy of its all-time high after recent rally. The current uptrend in major indexes is primarily fueled by an increasing speculation among investors that Fed would start cutting interest rates. Today’s FOMC statement and the accompanying “dot plot” are eagerly awaited, as any signs of a dovish stance or indications of policy easing could further fuel the market’s ascent, potentially catapulting the DOW to new record heights before year-end.
Expectations are leaning overwhelmingly towards Fed maintaining federal funds rate at the 5.25-5.50% range at today’s meeting. Should Fed decide to keep rates unchanged, it would mark the third successive meeting without a rate hike. Such a decision could be interpreted as a signal that the Fed views its cycle of rate hikes as effectively complete. This sentiment is likely to be mirrored in the revised dot plot, which is anticipated to exclude the rate increase previously suggested for this year. There remains, however, a much less probable scenario where the median dots may indicate a postponed hike.
Traders are aggressively pricing in the prospect of Fed beginning its rate-cutting cycle as early as May, with the odds exceeding 50%, as indicated by fed funds futures. Moreover, there’s a similar probability assigned to the expectation of a cumulative one percent rate cut by the end of 2024. It’s important to note, however, that market predictions often tend to be rather unreliable for periods extending beyond one or two months.
As for DOW, near term outlook will stay bullish as long as 36010.85 support holds. Next target is 36952.65 record high. Clearing of this record high would pave the way to 100% projection of 28660.94 to 34712.28 from 32327.20 at 38378.54.