Dow Jones dips as trade uncertainty lingers, consumer sentiment sinks

• China's tariff exemption talks ease tensions but fail to spark full recovery.
• Trump's "total victory" remark on tariffs shifts sentiment back to caution.
• UoM sentiment hits 52.2; inflation expectations surge to 6.5% for 2025.

The Dow Jones Industrial Average (DJIA) registered losses of over 0.32% on Friday amid uncertainty over the trade war between the US and China. However, as news broke that China may exempt some US goods from tariffs, Beijing seemed to have de-escalated tensions.  This and a deterioration in US consumer sentiment kept the DJIA hovering near 40,000 instead of testing the current week's highs.

DJIA slips as mixed China signals and Trump's tariff stance weigh on risk mood

Risk appetite remains mixed even though China has adopted a flexible negotiation stance with Washington. Meanwhile, US President Donald Trump's comments that he will consider a "total victory" if the US keeps 20% to 50% tariffs on foreign countries a year from now brought a leg down in the DJIA due to a slight shift in sentiment.

In the meantime, US consumer sentiment in April deteriorated further, as revealed by a poll by the University of Michigan (UoM). The index fell to 52.2 from 57 in March, the fourth lowest reading in data since the late 1970s. The survey showed that expectations for the economy, income, the stock market, and homebuying conditions worsened from a month earlier.

The UoM poll showed that inflation expectations had risen past 4.4% over the next 5 years, with Americans expecting prices to increase at 6.5% for the upcoming 12 months.

US equities are also feeling the pain as rising expectations of a recession in the US have risen from 30% to 45%, according to economists surveyed by Bloomberg.

Aside from this, Gold prices remained pressured by the US Dollar recovery. Bullion prices are down 1.89% at $3,285. At the same time, the US Dollar Index (DXY), which tracks the performance of a basket of six currencies against the US Dollar, rose 0.27% to 99.55.

Dow Jones price forecast

The Dow's bearish bias hasn't changed even though the index is set to finish the week with gains of over 2% above the 40,000 mark. The Relative Strength Index (RSI) shows momentum remains neutral, an indication that buyers are struggling to drive the DJIA higher, although sentiment has improved.

If DJIA clears 40,500, the next resistance would be last week's high at 40,790. Key resistance lies ahead at 41,000. Conversely, if sellers drive the index below April 23's low of 39,486, look for a test of the April 22 high of 39,271 to close the gap witnessed between April 22 and 23.