The FOMC’s projections and comments by the FOMC chair are expected to lead US stocks lower this Thursday when the indices open in a few minutes. The S&P 500 index is set for a lower open, with Credit Suisse setting a new support benchmark for the index at 4208/4202.
The FOMC’s projections were for the recovery conditions that satisfied their lift-off criteria to be achieved earlier than once thought, which provides for two potential rate hikes in 2023. Seven members of the governing council of the FOMC saw a 2022 lift-off date (up from four members in March), and inflation projections have also been reset higher to 3.4% in 2021, higher than the 2.0% target.
Also, pressuring the S&P 500 index is the rebound in initial jobless claims from 375K to 412K (consensus of 360K).
Credit Suisse projects that the index could find retracement support at 4208/4202 and warns of a more profound setback towards 4170/4168 or even the 63-day average at 4133 if the immediate support at 4208/4202 fails to hold. It is now left to see how deep a corrective selloff on the S&P 500 index in response to the FOMC decision could go.
Technical Outlook for the S&P 500 Index
The decline in the S&P 500 index following the FOMC decision caused the price to break below the channel’s lower border on the daily chart. Thursday’s daily candle has opened with a slight bounce on the 4220.63 support, but the upside lacks momentum, and this support could come under more significant pressure later in the trading session. If it gives way, 4176.61 and 4150.37 become additional support targets.
On the flip side, further recovery of the S&P 500 index targets 4257.90, with a break above this level sending the index to new all-time highs. In addition, 4275 and 4291 (as per Credit Suisse) and 4300 (psychological resistance) are potential new targets to the north, depending on the ability of bulls to hold above 4220.