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Dow Jones recovers after a week with many losses

  • The Dow Jones rebounds from lows near 38,000.00 after a sharp decline.
  • Market sentiment recovers as rate cut hopes rise.
  • US Personal Consumption Expenditure (PCE) Price Index inflation cools faster than expected.

He Dow Jones Industrial Average (DJIA) rebounded more than 250 points on Friday, as investor sentiment improved after US Personal Consumption Expenditure (PCE) Price Index inflation eased faster than expected. Rate markets are once again pricing in better odds for a September rate cut by the Federal Reserve (Fed). The Dow Jones is also boosted by a strong rebound in Salesforce Inc. (CRM) after the management company missed revenue expectations for the first time since 2006, leading to a sharp 20%+ drop in the stock.

US Personal Consumption Expenditure (PCE) Price Index inflation softened to 0.2% monthly in April, below the forecast of holding 0.3%. US personal spending also declined more than expected in April, falling to 0.2% month-on-month versus the 0.3% forecast and falling further from the previous month's revised 0.7%.

With inflation pressures showing more signs of cooling, investors are refocusing on hopes of a September rate cut by the Fed's Federal Open Market Committee (FOMC). According to the CME's FedWatch tool, markets rates are pricing in only a 48% chance of no rate changes in September.

Dow Jones News

The Dow Jones is broadly higher on Friday, with more than two-thirds of the index's constituent stocks in the green for the day. Amazon Inc. (AMZN) fell -2.5% to $174.77 per share despite announcing progress on Amazon's planned drone delivery services, as investors remain skeptical that the delivery company can see returns on its profits. automated delivery plans.

Salesforce Inc. (CRM) rises 5.5% on Friday, trading above $230.00 per share as the stock slowly recovers from a sharp sell-off earlier in the week. CRM fell more than -20% this week after the management software company missed earnings expectations by $40 million. CRM reported first-quarter revenue of $9.133 billion, up 11% year over year, while analysts' median estimates were expecting revenue of $9.145 billion. CRM also issued downward guidance for growth and profits as the long-standing company struggles to find new customer markets to break into.

Dow Jones Technical Outlook

The Dow Jones is rebounding from sharp near-term declines, testing 38,380.00 after hitting a new May low near 38,000.00 this week. The main stock index has fallen in all but three of the last ten consecutive trading days, with the DJIA still down -4.2% from all-time highs set just above 40,000.00 on May 20.

The Dow Jones continues to trade above the 200-day EMA at 37,220.72, but sharp near-term declines leave the index well below all-time highs and dealing with short-term pressure.

Dow Jones Five Minute Chart

Dow Jones Daily Chart

Economic Indicator

Personal Consumption Expenditure Price Index – Core (MoM)

The Personal Consumption Expenditure Price Index (PCE), published monthly by the US Bureau of Economic Analysis, measures changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve's (Fed) preferred indicator of inflation. The MoM figure compares the prices of goods in the reference month with the previous month. The core reading excludes the most volatile components of food and energy to give a more accurate measurement of price pressures. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why is it important for traders?

After releasing the GDP report, the US Bureau of Economic Analysis releases Personal Consumption Expenditures (PCE) Price Index data along with monthly changes in Personal Expenditure and Personal Income. FOMC policymakers use the annual PCE Core Price Index, which excludes volatile food and energy prices, as their main indicator of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible shift towards a more hawkish stance in the Fed's forward guidance and vice versa.

Source: Fx Street

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