Will the Dow drop below 30K? Investors focus on this Fed number as stock market threatens test of June lows.

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Stocks gained their footing on Wednesday as investors awaited a decision from the Federal Reserve that was expected to deliver another jumbo rate hike, with investors increasingly focused on how higher policymakers could let go of rates. expect.

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Major indices moved higher on Wednesday, but still they seem to be faltering. With the bears looking for the S&P 500 SPX,
-0.08%
To slide below its June low of 3,670, the question of whether the Dow Jones Industrial Average (DJIA),
-0.19%
Will move back below the 30,000 level it is trending on Tuesday. The Dow closed down 313.45 points, or 1%, at 30,706.23 on Tuesday, pushing the blue-chip gauge 2.7% above the perhaps psychologically important 30,000 range. The Dow closed at its 2022 low of 29,888.78 on June 17.

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The S&P 500 closed down 1.1% on Tuesday at 3,855.93. It is up 5.2% from the large-cap benchmark’s June 16 low of 3,666.77. Mid-June lows remain significant, with analysts warning that a test could soon come amid concerns over the Fed’s aggressive tightening momentum and an economic outlook tied to hikes by other central banks.

The stock market has rallied on the day of every Fed rate-hike decision in 2022. Could it happen again on Wednesday?

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The Fed is expected to hike rates by 75 basis points, or 0.75 percentage points, when it concludes its two-day meeting on Wednesday, with some traders and analysts penciling in an outside chance for a full percentage-point increase. Investors will focus on updated forecasts of rate expectations produced by Fed policymakers — the so-called dot plots — for clues to where the fed-funds rate is likely to peak — a level known as the terminal rate.

Observer of $1.3 trillion in assets says fed-funds rate could rise to 5%

Tom Essay, founder of Sevens Report Research, wrote in a Tuesday note that stock market declines over the past weeks cost the price 75-basis-point growth and slightly below the average Fed forecast for the terminal rate of 4.25%. Results consistent with that scenario would be unlikely to result in a significant move in either direction, “and importantly, it doesn’t make a retest of June any more likely than today,” he said. wrote.

Forecasting a rate increase of 100 basis points and/or an average terminal rate above 4.5% would be a different story: “This result will confirm market expectations that the Fed is bullish even earlier than previously expected, and that it will continue to weigh more on stocks.” Will put pressure At this point a test of the June lows would be likely except for a material surprise,” Essay said. “Defensive sectors and low-volatility ETFs should outperform, but only relatively, and we would expect all 11 S&P 500s.” Sectors will be less that day,” Essay said.

Why investors fear a full-percentage-point Fed rate hike will ‘turbulent’ Wall Street?

The Fed will announce its rate decision Wednesday at 2 p.m. Eastern, Fed Chair Jerome Powell is set to hold a news conference at 2:30 p.m.

check out: 4 things to watch when the Fed makes its rate-hike decision

Credit: www.marketwatch.com /

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