Dow Jones Industrial Average declines as risk appetite sours on Tuesday

• Dow Jones tumbles as inflation concerns return to cloud rate cut hopes.
• US wage pressures increased, driving fresh inflation fears.
• Dow Jones backslides 300 points, at risk of falling below 38,000.

The Dow Jones Industrial Average (DJIA) declined alongside the other major US equity indexes as risk aversion strikes again just ahead of Wednesday's latest Federal Reserve (Fed) rate call. The Fed's two-day rate decision meetings started today, and investors are balking as the Fed kicks off rate discussions with a fresh batch of data suggesting inflation remains a sticky problem for the US.

US wage pressures and housing costs remain inflation risk

The US Employment Cost Index for the first quarter rose 1.2% QoQ, accelerating from the forecast uptick to 1.0% and the previous quarter's 0.9%. The US S&P/Case-Shiller Home Price Indices for the year ended February rose 7.3%, above the forecast 6.7% and accelerating from the previous period's 6.6%.

The Chicago Purchasing Managers Index (PMI) in April also fell to nearly a two-year low of 37.9, sharply lower than the forecast 44.9 and the previous month's 41.4. The Consumer Board's Consumer Confidence Index also declined to its lowest reading since July of 2022, falling to 97.0 from the previous month's 103.1 (revised down from 104.7).

Read more: US CB Consumer Confidence declines to 97.0 in April

With housing inflation and wage growth continuing to outrun forecasts and expectations, hopes for near-term rate cuts from the Fed are evaporating, knocking risk appetite down at the knees. The Fed's latest rate call is slated for 18:00 GMT on Wednesday, followed by a press conference at 18:30 and headed by Fed Chair Jerome Powell.

Dow Jones news

Market hopes for 2024 rate cuts have fallen steeply in the first half of the year. Investors kicked off January expecting around six rate cuts from the Fed through the year, and Tuesday's inflation figures have knocked rate cut expectations all the way down to a single 25-basis-point cut in 2024. Markets now see a 51% chance of no rate cut in September, making November the current market favorite bet for a first rate trim.

Nearly all of the securities that make up the Dow Jones are in the red on Tuesday, with the only notable gainer in 3M Co. (MMM), which is up around 3.5% on the day after the company posted better-than-expected earnings. MMM is trading into $95.34 per share. Tuesday's worst DJIA security is Caterpillar Inc. (CAT), which backslid nearly 4$ and traded down 13 points into $337.00 per share.

Dow Jones technical outlook

The Dow Jones set an early high of 38,385.32 on Tuesday before risk aversion gripped investors, dragging the DJIA down to a low of 38,028.81. The major equity index is poised for a continued decline below 38,000.00.

The Dow Jones faces a technical rejection from the 200-hour Exponential Moving Average (EMA) at 38,337.24. Downside pressures are clear until the last near-term swing low into 37,750.00, while the index remains down 1.3% from last week's peak bids near 38,550.00.

Dow Jones five-minute chart

Dow Jones hourly chart