Dow Jones Industrial Average eases back on cautious Monday

• The Dow Jones shed 250 points to kick off the new trading week.
• Equities are pulling back in the face of lower rate cut expectations.
• Middle East geopolitical tensions are driving risk appetite even lower.

The Dow Jones Industrial Average (DJIA) shed around 250 points on a shaky market Monday, with risk appetite shriveling on the back of decreased rate cut expectations and tensions in the Middle East running on the hot side. Markets expect less than 50 bps in further rate cuts from the Federal Reserve (Fed) for the remainder of the year. Crude Oil prices are rising as commodity traders brace for a spat between Iran and Israel to widen into an outright conflict.

Equities took a hit at the outset of a new trading week, waylaid by crumpling investor hopes for further outsized rate cuts from the Fed through the rest of 2024. According to the CME's FedWatch Tool, rate traders now expect roughly an 80% chance of a single 25 bps rate trim from the Fed in November. The remaining roughly 20% expect the Fed to stand pat on November 7, and not move rates at all for the last Federal Open Market Committee (FOMC) gathering of the year.

Markets are bracing for an escalation in the newly-sparked conflict between Iran and Israel; commodity investors are worried that Israel is set to lash out at Iran and strike Iran's Crude Oil industry, a move that could send global energy prices soaring. Iran represents roughly 4% of global Crude Oil production. Israel is expected to deliver some kind of retaliatory attack against Iran, which launched a missile strike against Israel last week in retaliation for Israel invading neighboring Lebanon.

Dow Jones news

A risk-off Monday is weighing down equities across the board, with all but five of the DJIA's constituent securities dipping into the red for the day. Caterpillar (CAT) still found room to move on the high side, gaining eight-tenths of one percent and trading into record territory above $400 per share.

Insurance provider Travelers Companies (TRV) outran the rest of the Dow Jones losers, tumbling 3.5% to fall below $228 per share. Despite the headline hit on Travelers Companies, the insurance issuer is doing very well for itself, climbing over 55% from a late 2019 low of $99.35.

Dow Jones price forecast

Price action on the Dow Jones chart suggests a generally bullish sentiment since May, with the index consistently trading above its 50-day Exponential Moving Average (EMA), indicating that short-term momentum remains strong. The 200-day EMA serves as a significant support level, with the index maintaining a comfortable distance from it, reinforcing the underlying strength of the broader uptrend.

However, more recent sessions show a mild pullback. The DJIA faces resistance at around the 42,300 level, which has acted as a psychological barrier since mid-September. The downward price movement from this resistance, combined with a decline in momentum, is something to monitor closely. The MACD histogram has shifted into the negative zone, while the MACD line has crossed below the signal line, both of which are bearish signals, suggesting that short-term momentum may be slowing down.

Dow Jones daily chart