Dow Jones Industrial Average wobbles higher despite weak consumer confidence

• The Dow rose to a new record, but bidders remain skeptical.
• Consumer confidence surveys show US spenders still fear higher inflation.
• Fedspeak deviations continue, but rates markets have higher odds of another double cut.

The Dow Jones Industrial Average (DJIA) made way for another record bid on Tuesday, but price action remains tepid and intraday momentum struggles to break above the 42,000 level. The CB consumer confidence index for September fell to the lower end of a familiar two-year range, and Federal Reserve (Fed) Governor Michelle Bowman bowed out in her displeasure with the Fed’s recent 50 bps rate cut.

Consumer confidence deteriorated broadly on Tuesday, and consumer expectations for 12-month inflation accelerated to 5.2%. Consumers also reported a general weakening of the family’s six-month financial outlook, and consumer assessments of overall business conditions turned negative.

As Conference Board Chief Economist Dana Peterson explained, “Consumers’ assessments of current business conditions have turned negative, while views of the current state of the labor market have weakened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future incomes.”

Fed Board of Governors member Michelle Bowman made waves last week as the lone dissenter to the Fed’s near-unanimous decision to cut interest rates by 50 bps. Fed Governor Bowman has argued for a cut of less than 25 bps, citing continued concerns that the Fed could move prematurely before confirming that inflation will continue to fall toward the 2% target band.

While addressing a banking group in Kentucky, Fed Governor Bowman explained that last week’s jumbo rate cut “could be interpreted as a premature declaration of victory for our price stability mandate. Accomplishing our mission to return to low and stable inflation at our 2% target is necessary to promote a strong labor market and an economy that works for everyone over the long term.”

Despite Fed Governor Bowman’s concerns, the results of declining consumer confidence sparked a renewed bid in rate markets for a further cut in November. According to CME’s FedWatch tool, rate markets are pricing in a nearly 60% chance of a second 50bps rate cut on Nov. 7 and only 40% odds of a more reasonable 25bps rate cut. Rate traders priced in roughly equal odds of a 50-bps or 25-bps rate cut earlier in the week.

Dow Jones News

Despite an upward tilt on expectations of a rate cut, a move that would typically send stocks lower on the bid side, the Dow Jones is roughly in balance on Tuesday, with about half of the index’s constituent stocks trading in the red. Visa ( V ) is reportedly facing a potential antitrust lawsuit from the US Department of Justice, sending shares of the payment card services company back down -4.5% to $275 per share.

On the upside, Caterpillar ( CAT ) rose nearly 4% on Tuesday to a new all-time high of $388.44 per share, as the construction and mining equipment maker added to its already impressive 35% gain on a year from his quota. price. Despite single-digit sales declines reported by Caterpillar, profit margins have increased, and the company’s recently announced $20 billion share buyback authorization is keeping investor confidence pegged to the ceiling.

Dow Jones Price Forecast

The Dow Jones hit another record high on Tuesday as investors continue to bid higher for the major index, but intraday momentum remains generally tepid and bidders struggle to hold onto short-term gains. Prices continue to fall back into familiar territory just north of the 42,000 handle.

The DJIA is up 5.73% from the last low in the 40,000 region, but an unbalanced tilt to the bullish side has left price action with reduced technical points and the charts could be poised for a pullback to the 50 EMA days (EMA) near 40,770.

Dow Jones Daily Chart