- The Dow Jones rises as the US economy grows 2.8% in the third quarter, suggesting a soft landing despite slightly missing the 3% pace of the second quarter.
- ADP reports strong employment gains in October, indicating robust labor demand.
- Visa leads DJIA earnings after beating earnings expectations, while Caterpillar struggles after missing third-quarter EPS estimates.
The Dow Jones Industrial Average (DJIA) advanced during the North American session, with bulls targeting a break above 42,500 while US Treasury yields fell. The economy in the US grew below estimates but at a healthy pace. At the same time, employment data released by Automatic Data Processing (ADP) showed that the labor market is strengthening after announcing an outstanding employment report.
The US Bureau of Economic Analysis revealed that the economy grew 2.8% quarter-on-quarter in the third quarter of 2024, according to its preliminary reading. Although it fell short of the second quarter’s 3% mark, the figures suggest the economy is on track for a soft landing as the Federal Reserve (Fed) reduces borrowing costs to stimulate the labor market.
Regarding this, ADP’s National Employment Change report showed that private companies added 233,000 people to the workforce in October, exceeding estimates of 115,000. Nela Richardson, chief economist at ADP, said in a statement, “Even amid the hurricane recovery, job growth was strong in October.” Meanwhile, US bond yields retreated after hitting a three-month high of 4.337% and fell 0.65% or three basis points (bps) to 4.248%.
Following the data, the CME FedWatch tool shows probabilities of a 25 bps rate cut by the Fed reaching 97%, down from 98% a day earlier. This would leave rates in the range of 4.50%-4.75%.
Dow Jones News
The earnings session continued with Visa (V) leading the pack on the DJIA after the company announced fiscal Q4 2024 earnings. Visa revealed that earnings per share (EPS) were $2.71, up of $2.58, while revenue rose to $9.6 billion, beating forecasts of $9.48 billion. At the same time, the company cut 1,400 jobs.
Caterpillar (CAT) plunged before recovering as the company revealed lower-than-expected third-quarter earnings. Adjusted earnings per share (EPS) came in at $5.17, missing estimates of $5.34, although revenue rose to $16.11 billion, beating estimates of $16.08 billion. The company projects that sales and revenue will be slightly lower than expected at the end of the latest quarter.
At the time of writing, Visa leads the DJIA, gaining 3.68% to $292.25. Boeing (BA) gained 2.07% to $156.14, and Amazon (AMZN) rose 1.62% to $193.93. The laggards are International Business Machines (IBM) losing 1.95% to $206.33, followed by Nike (NKE) falling 1.76% to $77.02, and Intel (INTC) falling 1.72% at $22.51.
Dow Jones Price Forecast
The Dow Jones consolidates around 42,300 but cannot decisively break the 42,400 mark, which would open the door to challenge 42,500.
Early in the session, sellers pushed the DJIA towards a low of 42.122 near the Oct. 25 low of 42.043, although buyers bought the dip before the index tested the 50-day SMA at 41.907. . After that, the Dow Jones regained some ground, holding on to minimal gains.
If buyers reclaim 42,500, look for a test of the October 23 peak at 42,830 before testing 43,000 and the all-time high at 43,322.
Otherwise, if the Dow extends its losses below 42,000, the first support would be the 50-day SMA, before 41,500.
The momentum remains bullish as shown by the Relative Strength Index (RSI), which broke above its neutral line. However, it has consolidated, suggesting that neither buyers nor sellers are in control.
Dow Jones Daily Chart
The Dow Jones FAQs
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, since it only follows 30 companies, unlike broader indices such as the S& P 500.
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.
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 they are both 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.
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.
