- Wall Street falls and investors are cautious ahead of the release of the US CPI.
- US inflation is expected to show mixed readings with levels well above the Fed's 2% target.
- The Dow Jones Index has found support at 38,540, although the overall bias remains negative.
The Dow Jones Industrial Average (DJIA) has fallen into negative territory during Tuesday's morning session in the US. The moderate risk appetite seen during the European session has eased in the US, with investors taking a cautious stance ahead of Tuesday's US CPI release.
US consumer inflation is expected to have accelerated to 3.4% in March, from 3.2% annually in February. The core CPI, which removes the impact of seasonal food and energy prices, is estimated to decline to 3.7% from 3.8% annually in February. In any case, it shows levels much higher than the 2% underlying inflation rate set by the Federal Reserve (Fed) for price stability.
The caution of the markets has led the main Wall Street indices downward this Tuesday, although at the time of writing this article they are moving away from the session's lows. The Dow Jones fell 0.34%, to 38,760 points, followed by the S&P 500, which fell 0.25%, to 5,186 points, and the Nasdaq index, which fell less than 0.1%, to 16,238 points.
Dow Jones News
Among the sectors, Financial takes the biggest hit with a loss of 0.71%, followed by Industrial, down 0.5%, and Energy, which falls another 0.5%. Real Estate is the only sector that shows significant progress, 0.7%, while Utilities and Consumer Staples and Discretionary Goods record marginal gains.
Travelers Companies (TRV) is the worst performing stock in the Dow Jones, with a loss of 2.3% to $225.28, followed by American Express (AXP), which loses 1.8% to $219.83. The biggest gainers are Cisco Systems (CSCO), up 2.79% to $49.59, and 3M (MMM), up 1.23% to $93.06.
Dow Jones Technical Outlook
The technical outlook shows the Dow Jones index recovering after testing the support zone of 38,540 points. The overall trend, however, remains bearish, with the pair correcting lower from March highs near 40,000 points.
A further decline below 38,540 would expose the February low at 38,035. To the upside, the pair should surpass the 39,340 resistance zone to break the negative price structure and pave the way towards the all-time high of 39,985.
Dow Jones 4-hour chart
Frequently asked questions about the S&P 500
The S&P 500 is a widely followed stock index that measures the performance of 500 publicly held companies, and is considered a broad measure of the American stock market. The influence of each company in the calculation of the index is weighted based on market capitalization. This is calculated by multiplying the number of company shares listed on the stock market by the share price. The S&P 500 Index has achieved impressive returns: $1.00 invested in 1970 would have produced a return of nearly $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
Companies are selected by a committee, unlike other indices where they are included based on established standards. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be equal to or greater than $12.7 billion. Other criteria are liquidity, domicile, stock market listing, sector, financial viability, length of time they have been listed on the stock market, and the representation of the industries in the United States economy. The nine largest companies in the index represent 27.8% of the index's market capitalization.
There are several ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFDs) to place bets on the direction of the price. Additionally, you can buy exchange-traded funds (ETFs), mutual funds, and index funds that track the S&P 500. The most liquid of the ETFs is State Street Corporation's SPY. The Chicago Mercantile Exchange (CME) offers futures contracts on the index and the Chicago Board of Options (CMOE) offers options, as well as ETFs, inverse ETFs, and leveraged ETFs.
There are many factors driving the S&P 500, but primarily the aggregate results of its component companies, revealed in their quarterly and annual earnings reports. US and global macroeconomic data also contribute, influencing investor sentiment, which if positive drives earnings. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500, 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 Fed's decisions.
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.
