Stock Indices: Dow Jones surges a fourth straight day as the Federal Reserve keeps rates steady

On Wednesday Dow Jones Industrial Average traded within the range of 17,209.34-17,378.80. The benchmark closed at 17,327.34, rising 0.44% (76.22 points) on a daily basis. It has been the 18th gain in the past 32 trading days and also a fourth consecutive one. The daily high has been the highest level since January 4th, when the Dow went up as high as 17,405.48. The blue-chip gauge has extended its advance to 4.91% so far during the current month, following a 0.30% gain in February.

Among the companies included in the benchmark, 8 posted a daily decline on Wednesday and 22 posted a daily gain. Shares of Pfizer Inc (PFE) recorded the worst performance within the Dow for a third straight day on March 16th, going down 1.69% to close at $29.04. It has been the 14th drop in the past 22 trading days and also a third consecutive one. March 16th low of $28.87 per share has been the lowest price level since February 9th, when a low of $28.34 a share was registered. Pfizer shares have lost 2.12% of their value so far in March, following four consecutive months of decline. Pfizer has recently been pressured, after its cough syrup brand Corex was banned in India. Additionally, on Tuesday it became clear Pfizer CEO, Ian Read, received an over 20% lower total compensation in 2015.

At the same time, the shares of Caterpillar Inc (CAT) registered the most notable daily increase within the DJIA on March 16th, going up 2.62%, to close at $74.34, while marking their 14th gain in the past 21 trading days and also the steepest one since March 7th. March 16th high of $74.51 per share has been the highest price level since March 7th, when a high of $75.73 per share was reached. In addition, the daily volume (6.64M) has been the highest since March 8th. Caterpillar has added 9.81% to its value so far in March, following an 8.77% surge in the prior month.

Equities were largely supported on Wednesday after the Federal Reserve Bank kept the target range for the federal funds rate on hold between 0.25% and 0.50%, in line with market expectations. Fed policy makers noted that economic activity in the United States has been increasing moderately, but, however, they presented revised down GDP growth and inflation forecasts regarding 2016. US GDP is now expected to expand at 2.2% in 2016, down from a 2.4% growth rate, as projected in December 2015. The economy is expected to grow by 2.1% in 2017, a revision down from a 2.2% growth in the prior forecast, while in 2018 the GDP is to expand by 2%, or unchanged compared to the December forecast.

PCE inflation is now projected to be at 1.2% in 2016, down from a rate of 1.6%, as forecast in December, while inflation estimates regarding 2017 and 2018 were kept intact at 1.9% and 2%, respectively.

Fed policy makers now expect two rate hikes during 2016, after in December 2015 projections pointed to four potential increases in the target range. Prospects of a hike in borrowing costs tend to have a strong bearish effect on shares, as fixed-income assets become more attractive to investors.

According to extracts from the FOMC Policy Statement, released on March 16th: “…global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further.”

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the Thursday pivot levels for DJIA are presented as follows:

R1 – 17,342.87
R2 – 17,358.41
R3 (range resistance) – 17,373.94
R4 (range breakout) – 17,420.54

S1 – 17,311.81
S2 – 17,296.27
S3 (range support) – 17,280.74
S4 (range breakout) – 17,234.14

By using the traditional method of calculation, the weekly pivot levels for DJIA are presented as follows:

Central Pivot Point – 17,085.09
R1 – 17,348.31
R2 – 17,483.32
R3 – 17,746.54

S1 – 16,950.08
S2 – 16,686.86
S3 – 16,551.85