Dow Jones Forecast: DJIA falls as retail sales slowed & banks earnings impress

US futures

Dow future -0.32% at 43091

S&P futures 0.14% at 5958

Nasdaq futures 0.33% at 21366

In Europe

FTSE 0.69% at 8356

Dax 0.08% at 20640

US retail sales rise 0.4% MoM in December
Jobless claims rise 217k from 203k
Bank of America & Morgan Stanley posts strong Q4 profits
Oil eses back from $80.00

US retail sales & jobless claims are weaker than forecast

U.S. stocks are heading for a mixed start after weaker-than-expected data keeps rate cut hopes alive and as banks’ quarterly results continue to roll in.

US retail sales rose 0.4% month on month, down from an upward revision of 0.8% in November and below the 0.6% forecast. Meanwhile, jobless claims unexpectedly increased to 217K from 203K the previous week.

The data comes as the market continues to weigh up the outlook for Federal Reserve rate cuts after underlying inflation unexpectedly cooled in December. Yesterday's CPI data helped spare equity markets, with the Nasdaq closing with gains of 2.4%, the S&P 1.8%, and the Dow Jones 1.6%.

The markets want to see inflation softening without growth slowing too much. Slightly weaker data supports the Fed easing rates, but the market won’t want to see data weakening by too much.

Indices were also helped by a strong start to earnings season, with JP Morgan, Goldman Sachs, and Wells Fargo groups impressing the market yesterday. The encouraging figures continued today, with Bank of America and Morgan Stanley under the spotlight.

Corporate news

Bank of America is set to open 2% higher after the second-largest US lender posted stronger profits as the investment bank capitalized on strong trading revenues and deal-making in Q4.

Morgan Stanley was 1% higher after the bank's profits almost doubled in Q4, boosted by deal-making and trading revenue at the investment bank.

Taiwan semiconductor manufacturing jumped 4.3% premarket after the chipmaker said Q4 net profits rose 57% to a record level. The company continues to benefit from strong demand for semiconductors used in AI processing.

BP is set to rise by 0.5% after announcing that it will cut 5% of its global workforce as part of CEO Marie or Chili's last efforts to reduce costs and rebuild confidence in the energy giant.

Dow Jones forecast – technical analysis.

The Dow Jones has recovered from the 41,750 January low, rising above the 100 SMA and 43,000 to test 43,400 resistance, the late December high. However, the price failed to rise above this latter level, keeping it in a holding pattern. A rise above 43,400 is needed to create a higher high and put the bulls back in control. Immediate support is at 43k, and below that, support can be seen at 42,250, ahead of the 41,750 support zone. A break below here creates a lower low, and bears could gain momentum.

FX markets – USD rises, GBP/USD falls

The USD is edging higher after sharp losses yesterday as treasury yields fell following the CPI data. Attention is now turning to Trump’s inauguration on Monday and the possible inflationary measures.

EUR/USD extends declines following ECB meeting minutes of the December meeting that showed policymakers expect inflation to return to target in the first half of 2025. The central bank is increasingly confident that inflation will reach 2% earlier than predicted. This supports the view that the ECB will continue to cut rates amid concerns over the outlook for the economy

GBP/USD is pulling after the UK economy grew less than forecast. UK GDP rose 0.1% in November, below the 0.2% growth expected, and comes following a 0.1 contraction in both October and September. The data does little to calm fears of stagflation amid sluggish growth and persistently high inflation

Oil falls from 6-month high

Oil prices are easing after briefly rising to a six-month high in the previous session, boosted by Russian sanctions, larger-than-expected crude oil stockpiles, and a weaker USD.

WTI is back trading below $80.00 after briefly spiking above this level yesterday as the price reached its highest level since June 19.

US crude oil stockpiles fell last week to their lowest level since April 2022 amid rising exports and falling imports. The 2 million barrel draw was well above the 992,000 decline analysys had forecast and added to the tightened global supply outlook.

The US has imposed tighter sanctions on Russian oil producers and tankers, which means that buyers such as China and India are looking for alternative suppliers.

However, news that Israel and Hamas have agreed to a ceasefire deal in Gaza is putting some downward pressure on oil prices. While oil production was never directly affected by the war, the risk premium is fading.

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