- The Dow Jones index rebounds after strong retail sales results in the US, while tensions in the Middle East limit gains.
- Goldman Sachs leads gains, after better-than-expected quarterly results.
- The technical outlook remains bearish and the DJIA is moving away from March highs.
He Dow Jones Industrial Index (DJIA) has started the week with slight gains, recovering ground after last Friday's sales. However, investors are cautious about the possibility that the Middle East conflict could turn into a regional war with Iran involved.
Traders hold their breath as Israel considers its options for retaliating against Iran, and right-wing ministers demand an immediate response.
Retail sales data in the US has exceeded expectations, confirming the strong momentum of the US economy. This is positive for market sentiment, although its implications for monetary policy push back hopes of interest rate cuts from the Federal Reserve (Fed), creating negative pressure on stocks.
All in all, Wall Street is trading higher. The Dow Jones leads the gains, with a rise of 0.31%, to 38,097. The S&P 500 rises 0.21%, to 5,134, and the Nasdaq remains practically flat, at 16,175, during the American morning session.
Dow Jones News
Most Wall Street sectors recorded gains this Monday, with the Health sector leading the way, with an advance of 0.8%. This sector is followed by Financials, which rises 0.6%, and Materials, which gains 0.5%. Only the real estate and public services sectors lose value, with a drop of 0.93% and 0.23%, respectively.
Goldman Sachs (GS) leads Monday's gains with a 3.7% rally to $403.85, boosted by better-than-expected quarterly results. It is followed by Intel (INTC), which rises 2.6% to $36.44. On the losing side, Salesforce (CRM) falls 5.4% as news suggests the software company is in talks to acquire Informatica.
Dow Jones Technical Outlook
The technical picture shows the bears in control, as the Dow Jones index moves away from the all-time highs reached in March. The move below 38,560 has triggered a bearish head and shoulders pattern that could hint at a steeper decline.
The next bearish target is located at 37,825. Below, the measured target of the H&S pattern, which meets the mid-January low and 38.6% Fibonacci, stands at 37,087 points. A bullish reaction should surpass 38,540 to open the way towards 39,000.
Dow Jones Index 4-hour chart
Frequently asked questions about the S&P 500
The S&P 500 is a widely followed stock index that measures the performance of 500 publicly held companies, and is considered a broad measure of the American stock market. The influence of each company in the calculation of the index is weighted based on market capitalization. This is calculated by multiplying the number of company shares listed on the stock market by the share price. The S&P 500 Index has achieved impressive returns: $1.00 invested in 1970 would have produced a return of nearly $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
Companies are selected by a committee, unlike other indices where they are included based on established standards. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be equal to or greater than $12.7 billion. Other criteria are liquidity, domicile, stock market listing, sector, financial viability, length of time they have been listed on the stock market, and the representation of the industries in the United States economy. The nine largest companies in the index represent 27.8% of the index's market capitalization.
There are several ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFDs) to place bets on the direction of the price. Additionally, you can buy exchange-traded funds (ETFs), mutual funds, and index funds that track the S&P 500. The most liquid of the ETFs is State Street Corporation's SPY. The Chicago Mercantile Exchange (CME) offers futures contracts on the index and the Chicago Board of Options (CMOE) offers options, as well as ETFs, inverse ETFs, and leveraged ETFs.
There are many factors that drive the S&P 500, but primarily they are the aggregate results of its component companies, revealed in their quarterly and annual earnings reports. US and global macroeconomic data also contribute, influencing investor sentiment, which if positive drives earnings. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500, as it affects the cost of credit, on which many companies largely depend. Therefore, inflation can be a determining factor, as well as other parameters that influence the Fed's decisions.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
