Corrections in U.S to Drag Stocks Lower

Stocks edged higher on Wednesday, lifted by optimism for an interest cut by the US Federal Reserve. The FBM KLCI went up 2.25 points to close at 1,599.58, off an early low of 1,594.75 and high of 1,602.38, but losers edged gainers 501 to 480 on total turnover of 2.55bn shares worth RM2.29bn.

Support at 1,588/1,565; Resistance at 1,628/1,648

The overnight correction in the U.S markets should filter through to drag the local market lower today after the Federal Reserve reduced its forecast for further rate cuts in 2025. Immediate index support stays at 1,588, the 38.2%FR of the 1,529 low (6 Aug) to 1,684 high (29 Aug) rally, with stronger key supports at 1,565, the 23.6%FR level, and then 1,550. Immediate resistance remains at 1,628, next 1,648, followed by the September peak of 1,675.

Bargain Tenaga & DNEX

Tenaga needs to overcome the 04/09/24 peak (RM14.99) to boost upside momentum towards the 123.6%FP (RM16.30) followed by the 138.2%FP (RM17.11) ahead, while uptrend supports from the lower Bollinger band (RM13.36) and 61.8%FR (RM12.87) cushion downside. Similarly, DNEX shares will need sustained strength above the 61.8%FR (45sen) to challenge the 50%FR (50sen), with next upside hurdle from the 38.2%FR (54sen), while crucial support cushioning downside comes from the 50-day ma (36sen) and the 18/01/24 low (31sen).

Asian Markets Mixed as Traders Await US Fed Meet

Stocks in Asia struggled for direction Wednesday, following the weakness in Wall Street as traders braced for the Federal Reserve’s rate decision and its forecast for next year. With the Fed widely expected to cut interest rates by another 25 basis points later in the day, the focus is on its outlook for next year given Donald Trump’s proposed policies that may rekindle inflation. The central bank’s meeting also comes as US economic data showed a mixed picture, with retail sales increasing at a firm pace and industrial production unexpectedly declining.

On economic news, Japan’s exports grew 3.8% in November year-on-year, beating expectations of a 2.8% increase by economists polled by Reuters. Meanwhile, imports fell by 3.8%, far below expectations of their 1% expansion. Japan’s Nikkei 225 fell 0.72% to 39,081.71, while broad-based Topix slipped 0.31% to 2,719.87. Australia’s S&P/ASX 200 also fell 0.06% to end the day at 8,309.40, as South Korea’s Kospi rose 1.12% to 2,484.43. In mainland, the Shanghai Composite rose 0.62% to 3,382.21, while Hong Kong’s Hang Seng jumped 0.83% to 19,864.55.

Wall Street Plunges After Fed Lowers Rate in 2025

Wall Street’s major indexes tumbled overnight after the U.S. Federal Reserve delivered the expected rate cut but signaled it would cut fewer times next year than previously projected. The Dow lost 2.58% to 42,326.87, for its worst losing streak since an 11-day slide in 1974. The S&P 500 dropped 2.95% to 5,872.16 and the Nasdaq Composite shed 3.56% to 19,392.69 with losses intensifying into the close of trading. The sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year. As expected, the Federal Open Market Committee cut the Fed funds target rate by 25 basis points at the conclusion of its final policy meeting of 2024.

However, the central bank also reduced the number of projected rate cuts in the coming year. The policymakers now expect two interest rate cuts by the end of 2025, down from four in September, and set up the likelihood of a pause in January. In his subsequent press conference, Fed Chair Jerome Powell offered assurances that the economy is strong, inflation has come closer to the 2% goal, and monetary policy is well-positioned to deal with risks. Broadcom shares shed 7%, while Tesla dropped 8%. Microsoft, Meta Platforms and Alphabet sank about 2%, while Amazon dropped 3%.

Source: TA Research - 19 Dec 2024