Dow Jones Index Reacts to Fed Rate Hike Decision and Middle East Tensions

The Dow Jones Index has been on a downward trend, slipping by over 4.1% from its all-time high as its biggest constituent companies lose momentum. The index ended the week at 52,578 points, still up by 10% this year.

A key catalyst for the stock market this week will come out on Wednesday when the Federal Reserve concludes its two-day meeting and decides whether to hike interest rates by 0.25%. Economists mostly expect a rate hike, with the CME FedWatch tool showing an 87.3% probability that the Fed will hike rates.

However, since the rate hike has been priced in, what will move the stock market will be the forward guidance from the Federal Reserve. Signs that the bank will hike rates in the other two meetings will be bearish for the stock market.

The evolving situation in the Middle East, where tensions between the US and Iran remain high, is also a key catalyst for the stock market this week. The ongoing attacks on ships attempting to cross the Strait of Hormuz have led to rising crude oil prices, which will benefit companies like Chevron.