The Dow Jones Industrial Average (DJIA) followed the broader stock market lower on Tuesday, as investors braced for the Federal Reserve’s (Fed) rate decision scheduled for Wednesday. Market sentiment was cautious, with equities taking a modest dip ahead of the Fed’s announcement and ongoing uncertainty regarding trade deals from the Trump administration, which has provided few details about its negotiations.
The Fed is widely expected to keep interest rates unchanged, but attention is focused on any hints of a future pivot toward rate cuts. Investors are anticipating a potential shift in policy, with markets pricing in 100-125 basis points in rate cuts over the next 12 months. As a result, the Fed’s messaging will be closely scrutinized for signs of a rate-cutting cycle that could support economic growth in the months ahead.
Fed Rate Cuts and Trade Deal Uncertainty
The Trump administration continues to push for rate cuts, largely due to concerns over US debt financing rather than aligning with the Fed’s dual mandate of promoting maximum employment and controlling inflation. Despite this pressure, Fed officials have indicated their resistance to lowering interest rates prematurely, underscoring their commitment to a measured approach in response to economic conditions.
On the trade front, the Trump administration has claimed that multiple trade deals are in progress, but specific details remain scarce. The administration suggests that negotiations are underway with 17 to 18 countries, though it remains unclear which nations are involved. Notably, China, which recently indicated a potential willingness to engage in trade talks, is not part of these negotiations, contradicting earlier claims from President Trump’s team about ongoing discussions with Chinese officials.
Technical Outlook: Dow Jones Faces Resistance at Key Levels
Momentum in the Dow Jones’ broader recovery has stalled, with the index encountering resistance near the 50-day Exponential Moving Average (EMA) at 41,144. Bullish momentum has tapered off just below the critical 200-day EMA at 41,620, indicating a potential pause in the upward trend.
The 41,000 level has emerged as a key ceiling for buyers, with technical oscillators suggesting the market is overbought. This implies that a period of consolidation or a corrective pullback may be needed before a fresh rally can gain traction. Investors will be closely watching the Fed’s decision for any clues on the future direction of interest rates, which could play a pivotal role in determining the market’s next move.
