NASDAQ Index, SP500, Dow Jones Forecasts – Dow Jones Dives On Hawkish Warsh

Fed has also released economic projections. The economy is expected to be stronger than previously expected. The 2026 GDP projection was raised from +2.2% to +2.3%, while the Unemployment Rate projection was decreased from 4.3% to 4.1%.

PCE Inflation estimate was raised from 3.6% to 3.7% in 2026, while Core PCE Inflation projection was increased from 3.3% to 3.4%. The federal funds rate is expected to reach 4.1% in 2026 and remain at this level throughout 2027. I believe that the market will have doubts whether the rate hike cycle will stop at 4.1% in 2027.

Warsh’s comments during the press conference were hawkish. Fed Chair noted that the strength of the economy provided the central bank with a chance to focus on price stability. He said that the decision to raise the federal funds rate showed that Fed was serious about fighting inflation. He also added that Fed was focused on AI as capex needed to develop the new technology was one of the key reasons for high Treasury yields.

Today, traders also had a chance to take a look at the Retail Sales report. The report indicated that Retail Sales increased by +1.2% month-over-month in August, compared to analyst forecast of +0.8%. The encouraging Retail Sales data highlighted the strength of the American economy.

NAHB Housing Market Index decreased from 35 in August to 32 in September, compared to analyst consensus of 34. The index moved lower as builder sentiment declined amid high interest rates. Fed’s rate hike may put additional pressure on the housing market.

SP500 pulled back as traders focused on hawkish Fed and prepared for additional rate hikes in the future. In case SP500 settles below the 7550 level, it will move towards the nearest support level at 7530 – 7540. RSI remains in the moderate territory, so there is plenty of room to gain additional downside momentum in the near term.