The Fed and the markets: FOMC minutes preview and what's next

Key dates

Minutes from the March FOMC meeting will be released on Thursday at 4am AEST.

The more cautious tone at the March FOMC meeting and the economic data that has transpired has the market pricing in a 70% chance of a 25bp rate hike for the FOMC May, followed by ~100bp of rate cuts priced into early 2024.

“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.”

Expectations that the Feds rate hiking cycle is close to ending and that rate cuts are looming in the second half of 2023 have played a large part in the rally in US equities from the lows of mid-March.

However, with inflation data due tonight for March and more than capable of upending current market pricing, the outlook for US equities is finely balanced at current levels.

S&P 500 technical analysis

In recent sessions, the S&P 500 stalled ahead of the top of its 3800-4200 range. While we can’t rule out a brief false break higher, we see the 4200 area as the right area to lighten exposure looking for a retest of the bottom of the range at 3800ish in the months ahead.

Aware that should the S&P 500 see a sustained break above 4200 (three daily closes above 4200), it would likely see it extend its rally to the August 4327 high with scope towards 4500.

S&P 500 daily chart

Nasdaq technical analysis

After a rampaging run higher during March and the first quarter of 2023, the Nasdaq last week posted a loss of momentum or “reversal candle”, which set the scene for a pullback over the past week.

If the Nasdaq were to see a break of support 12900/12800, it would likely signal a deeper pullback is underway towards 12,400. However, should the Nasdaq hold support and then break above last week’s 13,348 high, it would set up a retest of the August 13,740 high.

Nasdaq daily chart

Dow Jones technical analysis

Last week the Dow Jones extended its rebound for a third week and is now eyeing significant downtrend resistance at 34,000 (from the bull market 36,952 high). At least in the initial instance, we expect this downtrend line to cap with scope for a retracement back to the 200-day moving average at 32,500.

Aware that should the Dow Jones make a sustained break above 34,000, it opens a test of the 34,712 high from December 2022 with a scope to 35,492 high from April 2022.

Dow Jones daily chart

1. TradingView: the figures stated are as of April 12^th, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation