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Dow Jones falls 600 points on Thursday as interest rate cut hopes deflate

  • The Dow Jones gives up almost 1% and moves away from 40,000.
  • The US services PMI rose to its highest level in 12 months, in a cautious reminder of services inflation.
  • Investors are hoping for good news from US durable goods orders on Friday.

On Thursday, the Dow Jones Industrials Index (DJIA) plummeted, falling more than 600 points and retreating to the level of 39,000.00 points, as investors retreated in the face of diminishing hopes of an interest rate cut in September by the Federal Reserve (Fed).

The S&P Global Services PMI for May rose to a 12-month high of 50.9 points on Thursday, well above expectations for it to hold at 50.0 points. The acceleration of activity in the services sector bodes poorly for investors desperate for signs of a rate cut by the Fed. Fitch Ratings warned the entire market on Wednesday that services inflation will remain persistent for some time, which will keep interest rates high for much longer than many investors expected.

According to the CME's FedWatch tool, interest rate traders are pricing the odds of the Fed cutting at least a quarter point in September at just 50%, a significant drop from the 70% chance. valued at the beginning of the trading week. US data will have one last chance to give investors a break on Friday, with US durable goods on the table.

US durable goods in April are expected to decline -0.8% month-on-month, a sharp drop from 2.6% in the previous month. The University of Michigan Consumer Sentiment Index is expected to rise to 67.5 in May from 67.4 in the previous period, while the University of Michigan's five-year consumer inflation expectations will remain at 3.1. % in May.

Dow Jones News

The Dow Jones falls sharply on Thursday and becomes the worst-performing US equity index. All the stocks that make up the Dow Jones are in the red on the day, with the losses led by Boeing Co. (BA), which is absolutely going to pieces. BA slumped -7.5% to $172.40 per share after the company announced negative cash flow, with no expectation that deliveries from the ailing aircraft maker will recover in the second quarter.

Dow Jones Technical Outlook

The Dow Jones sees losses accelerate as the index turns even more bearish on the day, pulling back from all-time highs above 40,000.00. Thursday has seen incredibly one-sided intraday action, falling from the day's early highs near 39,760.00.

The DJIA is retreating towards the 50-day EMA at 38,908.36 points. Despite the short-term declines, the index remains immersed in a bullish zone, with the index trading well above the 200-day EMA at 37,141.05.

Dow Jones five minute chart

Dow Jones Daily Chart

Source: Fx Street

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