How will the FOMC decision impact Wall Street volatility?

US markets rally despite weak consumer sentiment

United States (US) stock markets ended a challenging week with a relief rally on Friday, as a trifecta of good news offset a woeful University of Michigan Consumer Sentiment print. Despite Friday's gains, the US 500 fell 2.27% for the week, the US Tech 100 dropped 2.46%, and the Wall Street lost 1313 points or 3.1%, marking its worst weekly performance since March 2023.

Political developments boost market confidence

Sentiment started to improve during the Asian session on Friday after Senate Minority Leader Chuck Schumer expressed support for a Republican-backed funding bill, alleviating government shutdown concerns.

Further positive sentiment came from a Chinese announcement of a press conference today expected to detail consumption-boosting measures. It was followed by an agreement among German parties for a new fiscal deal to boost defence spending and growth.

Even a shockingly weak University of Michigan Consumer Sentiment index, which fell to 57.9 - the lowest since November 2022 - couldn't halt the rally.

Recession fears resurface

US equity futures have opened lower this morning, with the US 500 futures trading 0.56% lower at 5609 after US Treasury Secretary Scott Bessent said in an interview overnight there are no guarantees there won't be a recession, echoing sentiments expressed a week ago by President Trump.

Looking ahead, attention will shift to tonight's retail sales data and Thursday morning's Federal Open Market Committee (FOMC) meeting previewed below.

FOMC

Date: Thursday, 20 March at 5.00am AEDT

At the last FOMC meeting in late January, the Federal Reserve (Fed) kept the Fed Funds interest rate on hold at 4.25% - 4.50%. The Fed noted that economic activity remained steady, and the labour market was stable at strong levels but did not include previous references to progress on reducing inflation.

The Fed indicated that it was in no rush to cut rates again as it assesses the impact of President Donald Trump's trade and immigration policies. Fed Chair Powell has repeatedly reinforced this cautious approach, emphasising two weeks ago that the Fed is 'well positioned to wait for greater clarity.'

Last week's softer-than-expected February consumer price index (CPI) and producer price index (PPI) reports do not challenge the Fed's cautious stance on rate cuts, particularly since some of the softer components of the CPI release, like airfares, are not part of the Fed's preferred inflation measure, the core personal consumption expenditures (PCE) price index.

At this week's meeting, the Fed is expected to keep the Fed Funds rate unchanged at 4.25% – 4.50%. The Fed's projections (dots) will likely remain unchanged, indicating only two more 25 basis point (bp) rate cuts in 2025 - less than current market pricing, showing a cumulative 69 bp of Fed rate cuts this year.

Fed funds rate chart

US Tech 100 technical analysis

Last week, the US Tech 100 broke below uptrend support at 19,900 from the December 2022 low, adding to the technical damage that followed its break below the 200-day moving average (MA) at 20,262 the previous week.

We see Friday's bounce from oversold levels as potentially the start of a short-covering rally – corrective bounce. It would be viewed as a short covering rally because we can't find any good reason for US equity markets to undertake a more sustainable rally back to year-to-date highs in the current climate.

A possible bounce will likely encounter short-term resistance initially at 20,000 from the broken uptrend before stronger resistance at the 200-day MA, now at 20,266. Above here, the 50% fibonacci retracement of the decline from the 22,222 high to the 19,152 low sits at 20,694.

US Tech 100 cash daily chart

US 500 technical analysis

Last week, the US 500 broke below the 200-day MA at 5740, adding to the technical damage following its break of uptrend support at 5860 from the October 2023 4103 low the prior week.

As noted in the US Tech 100 section above, we see Friday's bounce in US equity markets as the start of a possible short-covering rally - corrective bounce simply because we can't find any good reason for US equity markets to rally back to year-to-date highs in the current climate.

A possible bounce will likely encounter short-term resistance initially at the 200-day MA at 5740 before horizontal resistance at 5770 – 5800. This is being reinforced by the 50% fibonacci retracement of the decline from the 6147 high to last week's 5504 low at 5830ish.

US 500 daily chart

• _{Source: TradingView. The figures stated are as of 17 March 2025. 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.}