The Dow Jones Index (INDEXDJX: .DJI)recorded the second successive decline on Wednesday, dropping 44 points as investors reacted to Federal Reserve Chairman Jerome Powell’s hawkish comments. The central bank retained interest rates in the 4.25-4.50% bracket as largely expected, but Powell highlighted the inflationary pressures of trade tariffs as a key concern. According to Powell, additional tariff hikes in the summer could trigger inflation that could keep the economy heated for months.
The Trump administration is expected to announce a new raft of trade tariffs in July after the expiry of a 90-day pause. The Fed raised its 2025 PCE forecast to 3%, from the previous forecast of 2.7%-2.8% range in March. This hints that the central bank policymakers will be in no hurry to trim interest rates and will likely adopt a wait-and-see approach, primarily backed by data. That ecosystem is likely to be supported by the geopolitical risks created by the Israel-Iran war.
However, despite the pressures, financial stocks like JP Morgan, Goldman Sachs, American Express and Walmart responded positively to the Fed rate decision, gaining between 0.8-1.7%. This will likely provide propulsion to Dow Jones Index. In addition, tech stocks like Microsoft, Nvidia and Apple will likely stay afloat, adding support to the index.
Broadly, developments in the Middle East continue to limit buyer appetite for high-risk assets like equities. Specifically, news of a rising prospect of US military involvement in the war could add downward pressure.
Dow Jones Index Prediction
The Dow Jones Index pivots at 42,265 points and action below that level will signal control by the sellers. That will likely see primary support established at 41,980. However, an extended control by the sellers could break below that level and test 41,650 points.
On the other hand, going above 42,265 points will invite the bulls to take control. That could see initial resistance encountered at 42,533 points mark. A breach of that level will invalidate the downside narrative. Furthermore, a stronger momentum could test 42,800.
