- The Dow Jones lost more than 300 points on Tuesday as geopolitical tensions rose.
- Stocks are slowly recovering, but remain stuck on the downside.
- The scant US ISM data did little to provide support to investors.
The Dow Jones Industrial Average (DJIA) plunged early Tuesday, driven lower by a mix of disappointing US manufacturing numbers and fresh threats of a spillover into the Israel-Hamas conflict. The US ISM Manufacturing Purchasing Managers’ Index (PMI) numbers failed to rebound in September, as many market participants expected. Israel’s recent military attacks on suspected Hamas targets in Lebanon have sparked a threat of retaliation from Iran, significantly expanding the scope of the conflict in the Middle East.
The US ISM Manufacturing PMI in September remained stubbornly at 47.2 for the second consecutive month, missing the expected rise to 47.5. ISM manufacturing paid prices also retreated more than expected during the same period, falling into contraction territory to 48.3, from the previous 54.0.
Looking further at the US data, JOLTS job postings in August rose to 8.04 million, up from the previous period’s revised 7.7 million, but the expansion in listed job postings may not be directly translating into new hires after the ISM Manufacturing Employment Index for September fell to 43.9 from the previous 46.0, missing the forecast increase to 47.0.
Investor attention has been completely focused on geopolitical tensions in the Middle East following early reports that Iran has executed a first salvo of missiles against Israel in response to Israel’s recent military attacks within Lebanon’s borders. The US has declared it will retaliate on Israel’s behalf, and investors are balking at the prospect of a rapid escalation of the ongoing conflict.
Dow Jones News
About two-thirds of the Dow Jones stock index is in the red on Tuesday, with limited gains for winners. Chevron (CVX) has been on the rise recently, gaining ground after announcing last week that the company will not shell out the capital to make large investments in developing LNG refineries within the U.S. Investors rewarded the energy company for keeping its cash resources close to its chest, and Chevron rises another 1.6% on Tuesday, approaching $150 per share.
In the opposite direction, Intel (INTC) is back in the red, falling 4.7% on Tuesday and plunging below $22.50 per share, as shareholders, who recently took heart from hopes of a mega-merger between Intel and competing chipmaker Qualcomm. However, the reality that regulators are unlikely to allow a single company to dominate the overwhelming majority of global silicon chip printing is weighing heavily on traders.
Dow Jones Price Forecast
The Dow Jones miss sees the main stock index retesting the 42,000 zone, with bidders struggling to regain footing despite setting new all-time highs late last week. Despite an intraday bearish shock on Tuesday, the DJIA remains well bid overall, rising more than 5% since the last notable low in mid-September in the 40,000 area.
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.
