Dow Jones Industrial Average eases after US PMI miss

VaselineAugust 22, 2024

0 3 minutes read

Dow Jones Industrial Average eases after US PMI miss

The Dow Jones lost 200 points Thursday as investors blinked.
US PMI numbers were mixed, with services rising but manufacturing falling.
Investors are waiting for further signs of Fed interest rate cuts.

The Dow Jones Industrial Average (DJIA) lost weight on Thursday, falling about 200 points after a miss in the US Purchasing Managers’ Index (PMI) numbers gave investors reason to pause. US PMI prints further highlighted a softening of the US labor market, sending jitters through markets, which continue to bet that a Federal Reserve (Fed) interest rate cut in September will solve all their problems.

US manufacturing PMI figures fell back to 48.0 in August, well below the constant estimate of 49.6. The US services PMI unexpectedly rose to 55.2 from 55.0, compared to the forecast decline to 48.0. Despite the rise in services PMI numbers, core employment numbers continue to show a slowdown in the US labor market, adding to concerns that were largely ignored when the US Bureau of Labor Statistics deleted retroactively more than 800,000 jobs from NFP (Nonfarm Payrolls) since March. week.

Markets continue to long for a September cut, but Thursday’s PMI data triggered a pullback from a recent surge in bets that the Fed would cut by 50 bps on September 18. Rate markets retreated on a generally healthier expectation of a single quarter point cut. in September, pricing in about a 75% chance of a 25 bps rate cut.

The Jackson Hole Economic Symposium is being held in Wyoming today, and investors will be looking ahead to an expected appearance on Friday by Fed Chairman Jerome Powell. Markets hope the Fed chief will introduce firmer guidance on how likely the Fed is to cut in September, as well as by how much.

Dow Jones News

The Dow Jones is down slightly on Thursday, with about two-thirds of the index down on the day. Losses are led by Intel Corp. (INTC), which fell another 3.3% to $20.70 per share. Gains remain significantly capped on Thursday, with American Express Co claiming the top of the board. (AXP), which managed to rise 0.85% to $248.40 per share.

Dow Jones Price Forecast

With the Dow Jones retreating, there is an upside risk of a bearish correction triggering, with top momentum exhausted just below the all-time highs set in July. The recent rally in the Dow Jones is poised to take a break and give short pressure a chance to pull price action back to the 50-day exponential moving average (EMA) at 39,481.00.

Dow Jones Daily Chart

Dow Jones FAQ

The Dow Jones Industrial Average, one of the world’s oldest stock indices, is compiled from the 30 most traded US stocks. The index is weighted by price rather than 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 subsequent years, it has been criticized for not being broadly representative enough, as it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

Many different factors determine the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in the company’s quarterly earnings reports is the main one. US and global macroeconomic data also contribute as they impact investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA because it affects the cost of credit, on which many corporations depend heavily. Therefore, inflation can be a major factor as well as other indicators influencing the Fed’s decisions.

The Dow Theory is a method of 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 watch for trends where both are moving in the same direction. Volume is a confirmation criterion. The theory uses peak and trough elements of analysis. Dow’s theory posits three phases of a trend: accumulation, when the smart money starts buying or selling; public participation, when the general public joins in; and distribution, when the smart money comes out.

There are several ways to trade the DJIA. One is the use of ETFs that allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A prime example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures allow 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 allow investors to buy one share of a diversified portfolio of DJIA stocks, thereby providing exposure to the overall index.

VaselineAugust 22, 2024

0 3 minutes read