The Dow Jones Industrial Average is down cautiously on Wednesday

VaselineAugust 28, 2024

0 3 minutes read

The Dow Jones Industrial Average is down cautiously on Wednesday

The Dow Jones fell three-quarters of a percent amid cautious market flows.
The market’s midweek session draws investors to look at US PCE inflation.
Decline in China’s GDP has investors worried about physical trade.

The Dow Jones Industrial Average (DJIA) pared short-term gains on Wednesday, falling 300 points in the midweek market session. A downgrade in China’s Gross Domestic Product (GDP) forecast has investors worried about a possible global trade glut, but most of the market is leaning toward Friday’s Consumer Price Index inflation print (PCE) from the US.

Shares were broadly lower after UBS cut its forecasts for Chinese GDP growth in 2024 and 2025. Ratings agency Fitch also issued a warning on the performance of several Chinese business sectors in the second half of 2024, in a double blow to market expectations. of Chinese growth forecasts.

According to UBS, China’s GDP growth is expected to come in at 4.6% for 2024, compared to a previous expectation of 4.9%, and its forecast for 2025 has been moved down to just 4.0% from 4.6%. From Fitch Ratings, China’s continued slowdown in property development is expected to remain a drag on issuers across multiple sectors, limiting the outlook for growth and activity in a measurable way in the latter half of the year.

This week, investors will be closely watching Friday’s reading of the US PCE price index for July. Annual PCE inflation is expected to rise to 2.7% from the current 2.6%, while the monthly figure is expected to remain unchanged at 0.2%. Those anticipating a cut in interest rates will look for the inflation data to be lower than expected. However, if the inflation data beats expectations, it could unsettle investor sentiment and put a wrench in current rate cut forecasts.

Dow Jones News

Warm risk appetite on Wednesday has most of the Dow Jones in the red for the midweek session. Earnings are led by Merck & Co Inc. ( MRK ), which rose about 0.6% to $163.90 a share, while Nike ( NKE ) fell 3.5% to $82.30 a share.

The moment is almost here. Despite a number of eye-popping earnings calls this season, everyone has been waiting for Nvidia ( NVDA ) to release its fiscal 2Q25 results, which finally arrive after the closing bell on Wednesday.

Dow Jones Price Forecast

The Dow Jones’ midweek pullback is picking up steam, with the stock index retreating nine-tenths of a percent and falling more than 350 points. The DJIA has dipped back below the 41,000 mark as near-term bullish momentum takes a break and overextended price action declines.

With bullish pressure running out near new all-time highs above 41,250, offers are poised for an extended retracement to the 50-day exponential moving average (EMA) reaching 40,000. Despite a near-term bust in bidding momentum, it is unlikely that Dow Jones short positions will find a clear path to the index’s latest low below 38,500.

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 28, 2024

0 3 minutes read