- The Dow Jones index falls for the fourth session this week, on track to record a reversal of almost 4.5% from the late March highs near 40,000 points.
- JPMorgan leads the losses as its quarterly earnings fall short of expectations.
- News that China has asked tech companies to phase out foreign chips hurts chip makers.
The Dow Jones Industrial Average (DJIA) reverses Thursday's gains into a negative Friday opening session. The quarterly earnings of some of the largest US banks have not encouraged investors, who already feel fragile sentiment due to diminished hopes of monetary easing by the Federal Reserve (Fed).
JPMorgan (JPM) and Wells Fargo (WFC) have reported weaker-than-expected first-quarter results, which is weighing on the financial sector. Meanwhile, megacapitals and chipmakers are reeling from the news that China has ordered telecommunications companies to phase out foreign chips.
The Nasdaq leads the losses on Friday, with a decrease of 1.85%, to 16,140 points, the S&P 500 falls 1.65%, to 5,113 points, and the Dow Jones loses 1.4%, to 37,895 points, in the first afternoon operations.
Dow Jones News
All Wall Street sectors record losses this Friday. The Materials sector recorded a decrease of 2.03%, the weakest performance, followed by Consumer Discretionary, 1.91% lower. The consumer staples and energy sectors are the least affected by risk aversion sentiment, with drops of 2% and 1.65%, respectively.
JP Morgan is taking the biggest hit on Friday, down 6.12% to $183.43 following disappointing quarterly data, while Intel (INTC), which has been crushed by news of China's decision, retreats one 4.8%, up to $35.83. On the positive side, Walmart (WMT) advances 0.28% to $60.26, followed by Apple (AAPL), which rises 0.24% to $175.46.
Dow Jones Technical Outlook
The Dow Jones index continues to move away from the all-time highs reached in March. The move below 38,560 has triggered a bearish head and shoulders pattern that could herald a steeper decline.
The next bearish targets are 38,000 and 37,750. The measured target of the H&S pattern is the mid-January low and the 38.6% Fibonacci retracement at 37,087. A bullish reaction above 38,540 could find some more supply before 39,000 (order block).
Dow Jones Index Daily Chart
Frequently Asked Questions About the Dow Jones
What is the Dow Jones?
The Dow Jones Industrial Average, one of the world's oldest stock indices, is made up of the 30 most traded securities in the United States. The index is weighted by price rather than capitalization. It is calculated by adding the prices of the securities that comprise it and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, also founder of the Wall Street Journal. In recent years it has been criticized for not being sufficiently representative, as it only tracks 30 companies, unlike broader indices such as the S& P 500.
What factors influence the Dow Jones index?
There are many factors that drive the Dow Jones Industrial Average (DJIA). The main one is the aggregate performance of its component companies, revealed in quarterly corporate earnings reports. US and global macroeconomic data also contribute, influencing investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA, 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 decisions of the Federal Reserve.
What is the Dow theory?
The Dow Theory is a method for identifying the main trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmation criterion. The theory uses elements of maximum and minimum analysis. The Dow theory proposes three phases of the trend: accumulation, when the smart money begins to buy or sell; public participation, when the general public joins the trend; and distribution, when the smart money abandons the trend.
How can I trade with the DJIA?
There are several ways to trade the DJIA. One of them is to use ETFs that allow investors to trade the DJIA as a single security, instead of having to buy shares of the 30 companies that comprise it. A prominent example is the SPDR Dow Jones Industrial Average ETF (DIA). Futures contracts on the DJIA allow traders to speculate on the future value of the index, and options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds allow investors to purchase a portion of a diversified portfolio of DJIA securities, providing exposure to the global index.
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.
