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US stocks plunge as market braces for hawkish Fed pivot

US stocks tumbled sharply overnight, concluding a turbulent April as traders anticipated a hawkish pivot from Fed Chair Jerome Powell in his upcoming post-FOMC meeting press conference today. DOW recorded -5% loss for the month, marking its worst monthly performance since September 2022. Similarly, S&P 500 and NASDAQ fell by -4.2% and -4.4%, respectively, ending their five-month streaks of gains.

Amidst this backdrop, Fed is widely expected to maintain federal funds rate at its current level of 5.25-5.50%. With no new economic projections or dot plot updates, all eyes are on Powell’s statement and subsequent press conference. Market speculation suggests Powell might confirm that a rate cut in June is unlikely and could adjust expectations to reflect fewer than three rate cuts for the year.

Powell’s comments will be crucial for investors, as any indication towards maintaining higher rates for longer, or even hinting at the possibility of a rate hike, could signal a more aggressive stance than previously anticipated. Currently, Fed fund futures reflect a 54% probability that rates will remain at the current level after the September meeting.

Technically, near term bias in DOW is kept on the downside after be rejected by 55 D EMA twice. Further decline is in favor through 37611.56 support. Nevertheless, fall from 39899.05 is currently seen as developing into a corrective pattern to rise from 32327.20 only. Hence, strong support would be seen from 38.2% retracement of 32327.20 to 39899.05 at 37000.42 to bring rebound. However, sustained break of 37000.42 will argue that larger scale correction could be underway.

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