Dow Jones Industrial Average breaks higher after US CPI beat

• The Dow Jones is testing above the 43,000 level for the first time since February.
• US CPI inflation came in cooler than expected, boosting investor hopes for Fed rate cuts.
• Trade tensions with China are easing after delegates from both sides reached a consensus.

The Dow Jones Industrial Average (DJIA) rose on Wednesday, bolstered by cooler-than-expected Consumer Price Index (CPI) inflation data for May, as well as a tentative trade policy framework following two days of trade talks in London. The framework still needs final approval from both President Donald Trump and Chinese President Xi Jinping; however, markets are hopeful that the progress will see both sides continuing to ease off from recent trade war rhetoric.

CPI inflation in May broadly came in below expectations, helping to bolster broad-market investor sentiment. Still, there are some glaring price volatility difficulties facing policymakers through the remainder of the year. Headline CPI inflation still rose on an annualized basis, ticking up to 2.4% YoY, and core CPI inflation excluding volatile food and energy prices held steady at 2.8% YoY. The figures are still well above the Federal Reserve's (Fed) 2% annual inflation target, but investors are still banking on increased odds of a Fed rate cut in September. According to the CME's FedWatch Tool, the odds of at least a quarter-point rate trim at the Fed's September rate call have risen to nearly 70%.

After two days of private trade talks held in London, delegates from the Trump administration and the Chinese government have reached a preliminary trade policy framework, which now heads to the respective desks of Presidents Trump and Xi. According to social media posts by President Trump, tariffs on Chinese goods are being held at 55%, with China maintaining its 10% import tax on all American-made goods.

Dow Jones price forecast

The Dow Jones Industrial Average has finally broken back above the 43,000 major price handle after months of tariff doldrums. Bullish investor sentiment has boosted the Dow Jones into 14-week highs, and has put the DJIA back on track to taking a fresh run at record highs above 45,000.

Despite technical oscillators firmly pinned in overbought territory, the Dow Jones continues to drift higher, with the major equity index for all but four of the last 12 straight trading sessions. The DJIA is trading well north of the 200-day Exponential Moving Average (EMA) near 41,775, and bidders will be looking to price in a fresh technical floor at the old swing high point near 42,600.

Dow Jones daily chart