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Dow Jones Industrial Average rises more than 400 points as markets bet on interest rate cuts

  • The Dow Jones rose above 39,550.00 as markets read between the lines.
  • Fed Chairman Powell concludes two-day testimony before Congress.
  • Markets are awaiting key US inflation data later in the week.

The Dow Jones Industrial Average (DJIA) rose on Wednesday, gaining more than 400 points and testing above 39,550.00 as equity markets resumed a risk-on stance. Rate cut hopes continue to underpin broader market flows, with investors regaining their footing and brushing aside the overall cautious tone from Federal Reserve (Fed) Chairman Jerome Powell.

Fed Chair Powell wrapped up the second of two days of appearances before U.S. congressional committees on Wednesday, with the U.S. central bank chief sticking close to a familiar script on both days. While acknowledging overall progress on inflation and admitting that the Fed is not going to wait until inflation hits the 2% annual target, Fed Chair Powell remains firmly in a cautious stance. Although the Fed will not wait for inflation to hit the overall target, Fed officials still want more evidence that inflation will eventually hit 2% before implementing rate cuts.

According to the CME’s FedWatch tool, rate markets are still firmly pinning their hopes on a September rate cut, with interest rate traders pricing in a 75% chance of at least a quarter-point cut in the federal funds rate on Sept. 18.

With the Fed dug in for further signs of slowing inflation, markets will be firmly focused on US inflation figures due out this week. US Consumer Price Index (CPI) inflation is due on Thursday, with US Producer Price Index (PPI) wholesale inflation due on Friday. Investors eager for rate cuts could be set for disappointment, with June’s annualised core CPI expected to hold steady at 3.4%, and Friday’s year-over-year core PPI expected to rise to 2.5% from 2.3% previously.

Dow Jones News

The Dow firmly shed cautious tones on Wednesday, rallying to a daily high of $39,554.55 and climbing more than 400 points. All but two of the stocks listed on the Dow were in the green on Wednesday, with Home Depot Inc. (HD) making a late advance to rise 2.1% to $344.18 per share, closely followed by Traveler’s Companies Inc. (TRV) and 3M Co. (MMM) which each rose 2.0%.

Dow Jones Technical Outlook

The Dow Jones has had a choppy two-day performance, rising a full percentage point from Tuesday’s lows near 39,130.00. Upside momentum is ripe for a breakout of the recent consolidation as price action tightens between the 50-day exponential moving average (EMA) near 39,000.00 and a priced supply zone near the main 40,000.00 price zone.

Dow Jones five minute chart

Dow Jones daily chart

Economic indicator

CPI excluding food and energy (MoM)

The CPI is published on US Labor Department and measures price movements by comparing retail prices of a representative basket of goods and services. The purchasing power of the dollar is diminished by inflation. The CPI is a key indicator for measuring inflation and purchasing trends. Products with high price volatility, such as energy and food, are excluded to capture a more accurate estimate of inflation. A reading above expectations is bullish for the dollar, while a reading below expectations is bearish.

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Next post: Thu Jul 11, 2024 12:30 PM

Frequency: Monthly

Dear: 0.2%

Previous: 0.2%

Fountain: US Bureau of Labor Statistics

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to this mandate, inflation should be around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures continue to rise amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Source: Fx Street

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