- The Dow Jones loses 250 points to start the new trading week.
- Stocks fall on lower expectations of rate cuts.
- Geopolitical tensions in the Middle East are further reducing risk appetite.
The Dow Jones Industrial Average (DJIA) lost around 250 points in a shaky market on Monday, with risk appetite declining due to lower expectations of rate cuts and Middle East tensions rising. Markets expect less than 50 bps in new rate cuts from the Federal Reserve (Fed) for the rest of the year. Crude oil prices are rising as commodity traders prepare for a dispute between Iran and Israel to turn into an open conflict.
Stocks took a hit at the start of a new trading week, hampered by falling investor hopes for further significant rate cuts by the Fed throughout the rest of 2024. According to the CME’s FedWatch tool, traders Rate policymakers now expect a roughly 80% chance of a single 25 bps rate cut by the Fed in November. The remaining roughly 20% expect the Fed to keep rates unchanged on Nov. 7 and not move rates at all at the last Federal Open Market Committee (FOMC) meeting of the year.
Markets are preparing for an escalation in the just-started conflict between Iran and Israel; Commodity investors are worried that Israel is ready to attack Iran and hit Iran’s crude oil industry, a move that could send global energy prices soaring. Iran accounts for approximately 4% of global crude oil production. Israel is expected to carry out some type of retaliatory strike against Iran, which launched a missile attack on Israel last week in retaliation for Israel’s invasion of neighboring Lebanon.
Dow Jones News
A risk-off Monday is weighing on stocks across the board, with all but five of the DJIA’s constituent stocks in the red for the day. Caterpillar (CAT) still found room to move higher, gaining eight-tenths of a percent and trading in record territory above $400 per share.
Insurance provider Travelers Companies (TRV) outperformed the rest of the Dow Jones losers, falling 3.5% to settle below $228 per share. Despite the headline hit on Travelers Companies, the insurance issuer is doing very well, rising more than 55% from a late 2019 low of $99.35.
Dow Jones Price Forecast
The price action on the Dow Jones chart suggests generally bullish sentiment since May, with the index consistently trading above its 50-day exponential moving average (EMA), indicating that near-term momentum remains strong. The 200-day EMA serves as a significant support level, with the index maintaining a comfortable distance from it, reinforcing the underlying strength of the broader uptrend.
However, the most recent sessions show a slight decline. The DJIA faces resistance around the 42,300 level, which has acted as a psychological barrier since mid-September. The downward price movement from this resistance, combined with a decrease in momentum, is something to monitor closely. The MACD histogram has moved into the negative zone, while the MACD line has crossed below the signal line, both are bearish signals, suggesting that the short-term momentum may be slowing down.
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.
