The Dow Jones Industrial Average gave up on new economic fears

VaselineSeptember 3, 2024

0 4 minutes read

The Dow Jones Industrial Average gave up on new economic fears

The Dow Jones fell 500 points on Monday as investor confidence falters.
Markets fell prey to fresh recession fears after US ISM numbers missed the mark.
Investors are scrambling for position ahead of this week’s NFP jobs report.

The Dow Jones Industrial Average (DJIA) retreated to start the new week of trading on Tuesday after US markets took the Labor Day holiday. US traders were greeted by another misprint in the US ISM manufacturing purchasing managers’ index (PMI) numbers, which failed to meet expectations for a rebound in print, sending another round of recession fears spreading in the stock markets.

The ISM manufacturing PMI for August came in below expectations, coming in at 47.2 and missing the market’s median forecast of 47.5. Despite a slight rebound from July’s multi-month low of 46.8, it failed to galvanize markets, giving already fleeing investors a perfect excuse to retreat from a recent lopsided tilt toward bullish expectations.

Tuesday’s general decline kicked off September trading with a notable bearish note as markets remain wary of softer US data on a release basis. A broad decline in the tech sector has extended a broad market pullback as the AI darling race begins to show cracks, with high-profile semiconductor companies struggling to achieve high growth numbers.

Friday’s US Nonfarm Payrolls (NFP) report is important on Friday and is the last round of key US labor data before the Federal Reserve (Fed) issues its latest rate call on September 18. Friday’s NFP print is expected to set the tone for market expectations for the depth of a Fed rate cut, with investors fully pricing in the start of a new rate cut cycle this month.

Dow Jones News

Most of the Dow Jones industrial average fell into the red on Tuesday, with less than a third of the index turning green. Verizon Communications ( VZ ) still managed a 2.4% gain on the day, rising to $42.80 per share, while Intel ( INTC ) fell about 8.5% to 20 .17 USD per share.

According to market experts, Intel is at risk of being pulled from the Dow Jones index, in large part due to reports that the technology company continues to consider cutting even more departments in the company in an attempt to reassure investors.

Elsewhere, 3M ( MMM ) now tops the Dow Jones, outperforming the rest of the stock index. 3M is up nearly 50% YTD in a stellar recovery after spending half a decade in the pits.

Dow Jones Price Forecast

Tuesday’s decline in the Dow Jones Industrial Average took the index back below the 41,000 level, down more than a full percent from the day’s opening bids and poised for its worst single-day performance in a month. The Dow Jones fell 550 points after hitting new highs just last week when the DJIA bidders hit 41,600.

Despite a short-term pullback, the Dow Jones is still trading in bull country, holding well above its 200-day exponential moving average (EMA) at 38,558. The nearest technical barrier for short pressure to target is the 50-day EMA near 40,230.

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 shares 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.

VaselineSeptember 3, 2024

0 4 minutes read