- The Dow Jones returned to the upper end of short-term consolidation on Tuesday.
- Equity markets are preparing for the results of the US election showdown that begins this week.
- The indices have been within a consolidation range ahead of the electoral window.
The Dow Jones Industrial Average (DJIA) gained ground on Tuesday, rising about 300 points to add three-quarters of a percent to its top line. The major equity index is crashing into the top of a short-term consolidation range as investors prepare for the outcome of the US election as American voters head to the polls.
Another Federal Reserve (Fed) rate decision looms this week. Fed Chair Jerome Powell is widely expected to deliver another quarter-point cut to interest rates on Thursday, bringing the federal funds rate down 25 basis points to 4.75%. The federal funds rate peaked at 5.5% in July 2023, and investors have been clamoring for a return to a low interest rate environment that has become familiar territory since U.S. interest rates .US fell to a record low near 0% in early 2009.
US electoral odds have both candidates neck and neck in a very close race for the presidency, with former President Donald Trump and current Vice President Kamala Harris with a difference of less than 5%, depending on the results of the surveys consulted. Equity investors, specifically those addicted to the technology sector, seem to generally believe that former President Trump is the preferred candidate for stocks, an odd choice considering that the Republican candidate has strongly expressed support for a return to the era of Smoot-Hawley tariffs in US history Trump has regularly suggested stiff tariffs across the board on all goods imported into the US, an incredibly inflationary economic policy proposal.
The University of Michigan (UoM) Consumer Sentiment Index is waiting in the wings and scheduled to be released on Friday. Investors expect the UoM November Sentiment Indicator to rise to a six-month high of 71.0 from 70.5 the previous month.
Dow Jones News
Most Dow Jones stocks are firmly in the green on Tuesday, with fewer than ten of the stocks listed in the index falling a half percent or more. The losses are being led by Boeing (BA), which retreated nine-tenths of a percent and fell below $154 per share. Boeing briefly rallied early Tuesday after announcing that the aerospace company finally negotiated an end to its workers’ strike, but markets remain concerned about the planemaker’s profitability going forward and sent the stock back to the lower end.
Intel (INTC) rose more than 4% on Tuesday, hitting $23.50 per share despite an announcement that the Dow Jones Industrial Average would delist the chipmaker in favor of long-running AI rally favorite Nvidia . Nvidia will be included in the Dow Jones stock index starting Friday, November 8.
Dow Jones Price Forecast
The Dow Jones has seen some short-term turmoil as the main index moves on the chart around the main 42,000 level. The price action has been anchored to the 50-day exponential moving average (EMA) since falling into its current range in late October.
Despite the recent consolidation, the Dow Jones remains deep in bullish territory. The index has surpassed its 200-day EMA for more than a year in a row and has closed higher in all but two of the last 11 consecutive calendar months.
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 both are 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.
