Created
: 2024.09.27
2024.09.27 02:38
The Dow Jones Industrial Average rebounded around 200 points on Thursday, with investors reinvigorated after US economic data eased rising fears of an economic slowdown. A better-than-expected Durable Goods Orders print has assuaged fears that the Federal Reserve (Fed) might have aggressively cut rates last week in response to a deteriorating economic outlook. However, investors will still be keeping a close eye on monthly jobs report figures in the coming weeks.
US Durable Goods Orders held flat at 0.0% in August, well below the previous month's revised 9.9%, but still beat the forecast of a 2.6% contraction. Initial Jobless Claims for the week ended September 20 also beat forecasts, printing at 218K versus the expected 225K and easing down from the previous week's revised 222K.
The recent 50 bps rate cut by the Federal Reserve (Fed) has caused some concerns in global markets. Some investors are worried that the large rate cut might be a response to a potential economic slowdown in the US. However, Fed Chair Jerome Powell stated last week that the rate cut was not a hasty reaction to signs of a recession, but rather a proactive measure to support the US labor market.
US Durable Goods Orders and week-on-week Initial Jobless Claims helped to bolster the Fed head's case, with both figures printing better than expected and the "soft landing" economic rhetoric holding steady. However, Friday's Personal Consumption Expenditure (PCE) inflation print will draw plenty of attention, and will be the real test of last week's Fed rate cut.
The Dow Jones is tilted firmly into the bullish side on Thursday, with over two-thirds of the equity index firmly planted in the green. Caterpillar (CAT) is trading firmly higher on the day, rising 3.3% near $391 per share following reports that China has unveiled another massive stimulus package meant to reinvigorate the Chinese housing and construction industries, a move that Caterpillar is widely expected to benefit from.
Despite Thursday's bullish tilt, the Dow Jones is struggling to make headway after the midweek's bearish pullback. Still, price action is within arm's reach of recent all-time highs, and bidders will have their sights set on the next leg up.
Dow Jones buyers have stubbornly staked their claim on the 42,000 handle, shrugging off signs of overbought conditions. On the low side, sellers will be looking to drag the equity board back down toward the 50-day Exponential Moving Average (EMA) near 40,870.
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on 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 corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary 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 confirmatory criteria. The theory uses elements of peak and trough analysis. Dow's theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable 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 enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Created
: 2024.09.27
Last updated
: 2024.09.27
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy