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Stocks are falling after the Fed hiked rates but signal that the end could be near. Turmoil in the banking sector continues.

US futures

Dow futures -0.22% at 33325

S&P futures -0.1% at 4079

Nasdaq futures -0.11% at 13013

In Europe

FTSE -0.73% at 7790

Dax -0.56% at 15723

• Fed hikes by 25bps & signals pause could be next
• Jobless claims rise to 242k
• Apple to report after the close
• Oil steadies after steep losses

US stocks are set to open modestly lower on Thursday as investors digest the latest Federal Reserve interest rate decision and more unease in the banking sector.

The Federal Reserve raised interest rates by 25 basis points in line with expectations, and the tenth straight hike in borrowing costs. However, the focus was more on what comes next, as Fed Chair Jerome Powell signaled policymakers were closer to the end of the tightening cycle.

While the Fed tried to keep options open, the market is pricing in just a 3% chance of a rate hike in June. Instead, bets are rising that the next move will be a rate cut, as recession fears rise.

Economic growth is starting to show some signs of slowing, and a credit crunch is brewing among regional banks. It would make sense that the Fed would want to see the impact of the tightening cycle on the broader economy before hiking further.

US jobless claims rose by more than expected to 242k, up from 229k last week and above the 240k forecast.

Regional banks will remain in focus amid signs of trouble in the fragile sector.
 

Corporate news

PacWest is falling 37% pre-market after the regional bank said that it was considering various strategic options, including a sale. The bank tried to calm the market saying that it hadn’t seen an acceleration in deposit outflows.

Paramount Global tumbles 10% after quarterly profit and revenue missed forecasts. The media firm also cut its quarterly dividend to 5 cents per share.

Apple is due to report after the close. The tech giant is expected to report EPS of $1.43 down 6% from the same period last year, on revenue of $93 billion, down 4.4% amid uneven China sales which could offset the weaker USD tailwind.
 

Dow Jones forecast – technical analysis

The Dow Jones ran into resistance at 34265 and rebounded lower, falling below the 20 sma, and is testing support on the 100 sma at 33333. The RSI has fallen below 50, keeping investors hopeful of further losses. A break below the 100 sma, exposes the 50 sma at 33085 and could result in a deeper selloff. Meanwhile, should the 100 sma hold, buyers could look for a rise back over the 20 sma at 33745 and the falling trendline resistance at 33990, to bring 34265 into focus and a higher high.
 

FX markets – USD falls, EUR rises

The USD is falling for a third straight day weighed down by the prospect that the Fed could pause rate hikes, and by worries over the health of the regional banking sector and the US debt ceiling. While the market is still expecting rate cuts this year, the Fed has pushed back against this.

EUR/USD is rising after the ECB raised interest rates by 25 basis points, in line with market expectations. The central bank considers that inflation is still too high. Attention will now shift to the press conference.

GBP/USD is rising towards 1.26 as PMI services data was upwardly revised to 55.9 in April, up from 53.7 in March and ahead of the preliminary reading of 54.9. This marked a 12-month high and adds to evidence that underlying growth in the economy is improving. Expectations of another rate hike next week keep the pound supported.

EUR/USD +0.36% at 1.1038

GBP/USD +0.44% at 1.2502
 

Oil steadies

Oil prices have steadied three straight days of declines, which oil price oil price fall over 9% so far this week amid rising demand concerns.

Prices have tumbled this week on fears about the health of the US economy amid more rate hikes and after weak manufacturing growth in China, the world’s largest importer of oil. Further, the EIA stockpile data fell for a third straight week suggesting that demand weakened. Inventories fell by 1.3 million barrels.

However, the selloff has steadied on hopes that the Fed could pause rate hikes from here.

WTI crude trades -0.1% at $68.50

Brent trades at +0.25% at $72.47
 

Looking ahead

15:00 Canada Ivey PMI

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