- The Dow Jones is set to end the week close to where it started.
- The main stock index recovered after Monday’s 1,000-point drop, but nothing more.
- Markets are now focused on next week’s inflation data.
He Dow Jones Industrial Average (DJIA) The US dollar is trading mostly flat on Friday, testing the water near the week’s opening bids after a bout of volatility sparked by market-wide concerns that the Federal Reserve (Fed) may have missed the boat on rate cuts. A turn to the softer side in US data late last week sparked a risk-on decline in global markets, along with a sell-off of the Yen carry trade after the Bank of Japan (BoJ) ended favorable rate spreads.
After starting the trading week with a thousand-point drop, the Dow Jones is back where it started, hovering around 39,400.00. Investors’ hopes for an “emergency rate cut” by the Fed failed to materialize after markets realized that six-digit US nonfarm payroll job growth, unemployment below 5%, stable wage growth, and weekly jobless claims within long-term averages may not be the economic disaster that was thought last week.
Still, market focus remains on the odds of a September rate cut. Rate markets have fully priced in the start of a rate-cutting cycle when the Federal Open Market Committee (FOMC) meets on Sept. 18, but bets on an initial double 50-basis-point cut have declined to better than par from nearly 70% earlier this week. According to the CME’s FedWatch tool, rate traders are pricing in a 53.5% chance of a 50-bp cut in September, with two additional cuts of 25 basis points each over the remainder of 2024.
Next week, investors will get a fresh batch of inflation data to worry about, with the US Producer Price Index (PPI) and Consumer Price Index (CPI) on the agenda for Tuesday and Wednesday, respectively. US Retail Sales and another update to the University of Michigan Consumer Sentiment Index are also scheduled for late next week. Core PPI inflation and headline CPI inflation are still stuck around 3% year-over-year, and investors will be hoping for a continued decline in the data to keep the Fed on track for rate cuts.
Dow Jones News
The Dow Jones remains balanced on Friday, with the index split fairly evenly between winners and losers. Intel Inc. (INTC) fell another 4.4%, dropping from $20.00 per share as the tech company continues to find no way to get its outsized P/E back above 100.00. After roughly $4 billion in quarterly earnings missed estimates by $150 million, the company redoubled its efforts to keep investors happy by immediately announcing the layoff of 15,000 people.
Dow Jones Technical Forecast
Friday’s flat candlestick puts the Dow Jones completely below the 50-day exponential moving average (EMA) for an entire trading week, a feat the index has not accomplished since the April low. The index still remains significantly below the all-time highs set at 41,371.38 in July, having fallen -7.22% from peak to trough.
Despite a weak period, the index still holds in bullish territory above the 200-day EMA at 38,025.14, and buyers will take any excuse to rekindle the fire and drive bids back to the higher side.
Dow Jones daily chart
The Dow Jones FAQs
The Dow Jones Industrial Average, one of the world’s oldest stock market indexes, is made up of the 30 most actively traded stocks in the United States. The index is weighted by price rather than capitalization. It is calculated by adding up the prices of the component securities and dividing 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, as it only tracks 30 companies, unlike broader indexes 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 the companies that comprise it, as revealed in quarterly corporate earnings reports. US and global macroeconomic data also contribute, as they influence investor confidence. 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 rely heavily. Therefore, inflation can be a determining factor, as well as other parameters that influence the decisions of the Federal Reserve.
Dow Theory is a method for identifying the major 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 both move in the same direction. Volume is a confirmation criterion. The theory uses elements of peak-trough analysis. Dow Theory posits three phases of a trend: accumulation, when smart money starts buying or selling; public participation, when the general public joins the trend; and distribution, when smart money leaves the trend.
There are several ways to trade the DJIA. One is to use ETFs that allow investors to trade the DJIA as a single security, rather than having to buy shares of all 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 overall 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.
