The Dow Jones is getting back on its feet on Thursday

VaselineAugust 29, 2024

0 3 minutes read

The Dow Jones is getting back on its feet on Thursday

The Dow rose 450 points on Thursday as sentiment recovered.
US GDP figures boosted investor confidence after beating expectations.
US PCE inflation figures continue to be seen on Friday.

The Dow Jones Industrial Average (DJIA) rose 1.1%, or 450 points, on Thursday, supported by a decline in the forecast for US Gross Domestic Product (GDP) growth numbers in Q2. Inflation data from the US Personal Consumption Expenditure (PCE) Price Index due on Friday is still the main print of the week. Markets remain confident that the Federal Reserve (Fed) is on track to start a rate-cutting cycle in September.

Second-quarter US GDP beat forecasts on Thursday morning, supporting market sentiment and sending investors back into a bullish position. Annualized second-quarter GDP came in at 3.0%, compared with an expected 2.8% hold, and initial jobless claims also fell to 231,000 for the week ended August 23. Investors were expecting a print of 232,000 compared with a revised 233,000 the previous week.

Friday’s US core PCE inflation is expected to hold steady on the month and move slightly higher on an annual basis. July’s monthly core PCE inflation is expected to hold at 0.2%, while the annual figure for July is expected to rise to 2.7% from 2.6% previously. A below-expected print will send markets piling back on hopes for an extended initial Fed tapering on September 18, while an above-forecast publication could send traders scrambling for a potential resurgence of inflation, preventing the Fed from even ahead of a widely expected cut.

Dow Jones News

A risk on Thursday has most of the Dow Jones trading in the green in the back half of the trading week. Only one of the Dow stocks is in the red for the day, with Home Depot ( HD ) falling about a fifth of a percent to trade below $370.00 per share.

Nvidia’s ( NVDA ) after-hours earnings call this week failed to jump-start tech-savvy investors. Nvidia reported less-than-expected earnings growth, with overall profit growth failing to meet soaring expectations set by runaway investors.

Dow Jones Price Forecast

The Dow Jones rebounded above 41,300 on Thursday after a brief midweek dip below 41,000. The index took a break on Wednesday but tilted back to the bullish side as daily candles continue to test charts near record highs set earlier in the trading week.

Traders hoping to capitalize on a pullback to the downside risk underestimating the pressure in the up market, but risk takers will be looking for signs of a technical breakdown to jump on the short bandwagon. Immediate technical targets hover near the 50-day exponential moving average (EMA) just above 40,000 major prices.

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 29, 2024

0 3 minutes read

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