S&P 500, Dow Jones News and Analysis
- The Fed’s hawkish hold sent risk assets lower in the week
- S&P 500 selloff tests crucial support eying an interesting start to the final week of the quarter
- Dow Jones: The laggard on the way up, could it lead on the way down?
- The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
The Fed’s Hawkish Hold Sent Risk Assets Lower in the Week
Federal Reserve officials produced their quarterly forecasts at the September FOMC meeting on Wednesday, making some notable updates. The hardest hitting data point revolved around the dot plot on interest rates throughout the forecast period which revealed only 50 basis points of cutting in 2024 compared to 100 bps in the June forecast.
Equity markets have subsequently repriced lower as fewer rate cuts means equity markets have to endure restrictive monetary conditions for longer than anticipated. In addition, the big tech stocks have shown a susceptibility to higher interest rates as Amazon’s e-commerce business is likely to ease as household discretionary incomes get squeezed for longer. Nvidia has also eased on the back of TSMC reportedly asking suppliers to slow down deliveries after previously expressing demand concerns, weighing on chipmakers.
S&P 500 Selloff Tests Crucial Weekly Support
4325 is a critical medium-term level for the S&P 500 as a beak and hold below it opens up the index for further pressure early in the week to come. The 61.8% Fibonacci retracement of the major 2020 move could see an imminent approach with further downside targets eyed at 4195.
S&P 500 Weekly Chart
Source: TradingView, prepared by Richard Snow
Dow Jones: The Laggard on the Way up, Could it Lead a Selloff?
The Dow Jones Industrial Average Index proved to be the laggard during the equity bull market which poses the question if it will lead a broader reversal? A reversal is too soon to call given how far equities have come since bottoming in October last year but the early signs are accumulating.
From a technical perspective, the Dow closed out the week with a lower close compared to the prior swing low in August. It has also traded and closed below 34,281, the August 2022 swing high which had previously capped gains throughout much of 2023. The extended selling now brings the 61.8% Fibonacci retracement of the major 2020- 2021 move into consideration at 33,785. The S&P 500 and Nasdaq 100 are yet to make a lower low and have help up better than the Dow, at least on the charts.
32,578 is another key longer-term level of interest but remains a fair distance away from current prices but a close below the 61.8% Fib brings the level into contention.
Dow Jones Weekly Chart
Source: TradingView, prepared by Richard Snow
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--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
