Dow Jones flattens as Fed rate call looms

The Dow Jones is trading sluggish on Monday, stuck near 43,800.
Markets await what is broadly anticipated to be the Fed’s last rate cut of 2024.
Increases in telecoms and retail stocks have offset declines in key tech and health stocks.

The Dow Jones Industrial Average (DJIA) continues to churn on the low end of recent chart action, with the major equity index bogged down near 43,800. Investors are gearing up for the Federal Reserve’s (Fed) last policy meeting of the year, with the US central bank widely expected to deliver one last quarter-point rate cut before investors wrap it up for the holiday season.

US Purchasing Managers Index (PMI) activity figures came in mixed on Monday, with the US Services component accelerating to its highest print in just over three years while the Manufacturing component eased back further into contraction territory. December’s US Services PMI confidence survey results showed aggregated expectations for business activity have risen to 58.5, the highest level since November of 2021. Median market forecasts had expected a downside print of 55.7 versus November’s 56.1. On the Manufacturing PMI side, business expectations declined more than expected, falling to 48.3 compared to the anticipated 49.4 and last month’s 49.7.

It’s a full docket this week with high-weight US data dropping on markets every day through to the weekend, with US Retail Sales on Tuesday, US Gross Domestic Product (GDP) figures on Thursday, and US Personal Consumption Expenditure Price Index (PCE) inflation on Friday. However, the key event this week is the Fed’s last rate call of 2024. Fed officials head behind closed doors to deliberate during a two-day meeting on Tuesday, with the Fed’s final decision rendered on Wednesday. This week’s Fed meeting carries additional weight, as the US central bank will also be updating its ‘dot plot’ of interest rate expectations. Traders widely expect the Fed to reduce its policy rate by 25 bps to 4.5%.

Dow Jones news

The Dow Jones is teetering near the midpoint on Monday, with winners and losers cut roughly down the middle. Unitedhealth Group (UNH) is shedding weight, falling 3.7% and testing $501 per share, while Honeywell International (HON) is rising after news the company may be streamlining its operations and splitting off its aerospace division into a separate company. HON is up around 3.6%, trading near $236 per share.

Dow Jones price forecast

The Dow Jones is continuing its slow bleed down the charts on Monday, kicking off a new trading week holding on the low end. The Dow has posted declines for the last seven consecutive sessions, and further weakness is likely as price action falls back to the 50-day Exponential Moving Average (EMA) near 43,500.

Despite near-term softness, the Dow Jones still holds comfortably on the high end of long-term momentum. The Dow is still trading above the last swing low into the 43,000 handle, and has closed higher for all but two of the last 12 straight trading months.

Dow Jones daily chart

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

Next release: Wed Dec 18, 2024 19:00

Frequency: Irregular

Consensus: 4.5%

Previous: 4.75%

Source: Federal Reserve

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