- The Dow Jones surpassed 42,000 to set a third consecutive record high on Thursday.
- Stocks are firmly bullish after the long-awaited Fed rate cut this week.
- The Fed’s jumbo 50 basis point rate cut on Wednesday has paved the way for more cuts this year.
The Dow Jones Industrial Average (DJIA) broke the psychological 42,000 level on Thursday as stocks surged in a broad-market bull run after the Federal Reserve (Fed) finally made its first rate cut in more than four years. Stocks have taken a full risk-on stance, and the Dow is on track to close up nearly 500 points in record territory.
On the data side, US Initial Jobless Claims fell back to 219K for the week ending September 13, down from the previous week’s revised 231K and below the median market forecast of 230K. The Philadelphia Fed Manufacturing Survey for September also beat expectations, with the manufacturing conditions index improving to 1.7 from the previous seven-month low of -7.0 and easily beating the expected forecast of -1.0.
Fed Chair Jerome Powell convinced markets that this week’s jumbo 50-basis-point cut was not a quick response to deteriorating economic conditions, but rather an attempt to get ahead of the curve and strengthen the U.S. labor market. Powell succeeded in rebranding a full half-percentage point cut as a “recalibration,” and investors rewarded the Fed’s latest narrative shift by pumping cash into stocks across the board.
Dow Jones News
Despite some stocks remaining stubbornly in the red, the majority of the Dow Jones index is deeply in the green on Thursday. Salesforce (CRM) and Caterpillar (CAT) are up more than 5% since the morning open, hitting $266 and $373 per share, respectively. Salesforce is up despite the announcement that Disney (DIS) would stop using Salesforce-owned Slack as the company’s communications product after a security exploit allowed a hacker entity to capture and leak a terabyte of company information.
Dow Jones Price Forecast
With the Dow Jones up around 600 points at its highest point on Thursday, the main stock index is on track to capture another record close as price action takes hold north of 42,000. The Dow Jones’ stellar performance in 2024 continues unabated, with the stock board set to close in the green for a fifth straight month.
Buyer exhaustion continues to threaten intraday positions built since the midweek pullback at 41,500. However, any real threat would first require sufficient short pressure to integrate into the chart, a difficult proposition with current prices facing no technical resistance and the Dow Jones trading a scorching 8% above the 200-day exponential moving average (EMA) at 38,656.
Dow Jones daily chart
The Fed FAQs
Monetary policy in the United States is directed by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and to promote full employment. Its main tool for achieving these goals is to adjust interest rates. When prices rise too quickly and inflation exceeds the Fed’s 2% target, the Fed raises interest rates, increasing borrowing costs throughout the economy. This translates into a strengthening of the US Dollar (USD), as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates to encourage borrowing, which weighs on the greenback.
The Federal Reserve (Fed) holds eight meetings a year, at which the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC consists of twelve Federal Reserve officials: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the eleven regional Reserve bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy called Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a jammed financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy high-quality bonds from financial institutions. QE typically weakens the US dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the capital of maturing bonds in its portfolio to buy new bonds. It is usually positive for the value of the US dollar.
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.
