Dow Jones Forecast: DJIA struggles ahead of FOMC minutes

US futures

Dow future 0.04% at 42525

S&P futures 0.0% at 5907

Nasdaq futures 0.15% at 21160

In Europe

FTSE -0.5% at 8195

Dax -0.36% at 20275

US ADP payrolls fall to 122k & jobless claims drop
Concerns over reviving inflation remain after yesterday's ISM services data.
FOMC minutes are due later
Oil rises on persistent supply worries

Inflation concerns linger ahead of Fed minutes

U.S. stocks are set to open lower as investors struggled to recover from yesterday's sell-off despite weaker ADP payroll data and ahead of the FOMC minutes later today.

ADP payrolls fell to 122k in December, down from 146k in November and below forecasts of 140k. Meanwhile US jobless claims fell to an 11 month low. The data comes after JOLTS job openings unexpectedly rose to 8.09 million in November, ahead of the 7.77 million forecast. Investors are assessing the data ahead of Friday’s non-farm payroll report, which could be the first major test for the markets this year.

Stocks fell sharply yesterday, led by tech, after economic data showed a greater-than-expected expansion in the US service sector, fueling concerns surrounding stubborn inflation. The data has raised concerns over the trajectory for interest rate cuts from the Federal Reserve.

According to the CME Fedwatch tool, the market is pricing in just one rate cut this year, down from the two expected in December.

Bond yields have also risen, with the 10-year treasury yield at 4.7%, near the level last seen in April. Bond yields have been steadily climbing on expectations that Trump's tariffs and tax plans could cause a revival in inflation.

Looking ahead, attention is now turning to the minutes from the December Fed meeting. Fed officials have been signaling that they would be cautious in cutting rates further. The minutes may help clarify how policymakers approach further rate reductions this year. A more hawkish tone in the minutes could dampen demand for stocks.

Corporate news

Exxon Mobil has warned about Q4 income, which is expected to be around $1.75 billion lower than the previous three months owing to declining oil refining profits and weak returns from operations. In a regulation filing, the energy giant warned that refining margins would hit earnings by between $300 million and $700 million compared to the third quarter. The company is now expected to deliver EPS of $1.76 in Q4, down from $2.48 a year ago.

Nvidia is rising 0.5%, recovering after its largest one-day sell-off on Tuesday since September 2024.

Palo Alto Networks is set to open over 2% lower after analysts at Deutsche Bank downgraded the stock amid concerns over the company's growth prospects.

Dow Jones forecast – technical analysis.

After falling below its ascending channel in mid-December, the Dow Jones has been consolidating between 42k and 43k. Sellers, supported by the RSI below 50, will look to break below the 42k level to create a lower low and bring 41.6k into focus. Buyers will look to rise above 43k and 43.3k at the December 30 high to create a higher high and expose the 50 SMA at 43.5k.

FX markets – USD rises, GBP/USD falls

The USD is rising, and tracking treasury yields are higher following firm ISM services PMI and JOLTS job openings yesterday and ahead of ADP private payrolls and FOMC minutes later today.

EUR/USD is falling amid a stronger USD and after weaker-than-expected German data. German factory orders plunged 5.4%, and retail sales fell 0.6%, suggesting the gloom hanging over the euro zone's economy is going nowhere fast. Eurozone economic sentiment was also weaker than expected, falling to 93.7 from 95.6.

GBP/USD is falling for a second straight day dropping to its lowest level since April. The fall in the pound comes even as gilts spiked higher, with long-term government borrowing costs at the highest since 1998. This suggests that the market is increasingly concerned about the perilous UK fiscal outlook. BoE Deputy Governor Sarah Breeden will speak about the outlook for UK inflation on Thursday.

Oil rises as supply concerns persist.

Oil prices rise for a second straight day and trade higher for 8 out of the nine previous days, pushing above $75 a barrel.

The latest leg higher comes as supplies from OPEC+ tightened while US crude oil stockpiles also fell last week.

Oil output from OPEC+ declined in December after two months of increase. In Russia, oil output averaged 8.971 million barrels a day in December, below its target level.

The latest API data showing a decline of around 4 million barrels in US crude stockpiles is also helping to raise the oil price. Meanwhile, weather-related support and hopes of further stimulus in China keep the price buoyant.

Despite the strong start for oil at the beginning of 2025, expectations are for oil prices to be, on average, down this year compared to 2024, partly due to a production increase from non-OPEC countries.

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