The Dow Jones is struggling in the mid-range as risks weigh on hopeful traders

• Dow Jones catches chart friction near 42,200 as investors falter.
• The precursor jobs data for the upcoming NFP on Friday surprised higher.
• Geopolitical concerns limit gains as investors turn to the Middle East.

The Dow Jones Industrial Average (DJIA) is caught in a sideways trap in the first week of October as geopolitical concerns weigh on risk appetite. Investors are jockeying for position ahead of Friday’s US Nonfarm Payrolls (NFP) jobs data print, with future Federal Reserve (Fed) rate moves likely to be driven by labor force numbers.

US ADP labor change numbers for September rose more and faster than most market participants expected, recording 143,000 net new jobs over the month. Median market forecasts had called for a rise to 120,000 compared with August’s revised print of 103,000. Despite the firm results on the advance jobs numbers, investors will await the final call on the official advance figures in NFP on Friday.

Fed Chairman Jerome Powell warned that the huge 50 bps rate cut in September should not be a signal that more extreme rate moves are on the way. The Fed’s SEP outlook for rate cuts shows just another 50 basis points in total over the next few meetings. For the most part, rate markets fell in line with the Fed’s own outlook; according to CME’s FedWatch tool, rate traders see a 60% chance of a 25bps rate cut in November, with the remaining 40% still hoping for a repeat jumbo 50bps cut.

In addition to the global market outlook for Fed interest rate cuts, the outlook for domestic manufacturing has evolved into a shaky outlook, with a strike by dock workers in most of the East and Gulf coasts hampering the flow of physical goods. Tensions in the Middle East are also spreading following Iran’s missile attack on Israel in retaliation for Israel’s recent incursion into Lebanon. Investors are waiting to see how Israel will respond to the direct confrontation.

Dow Jones News

Despite a shaky start to the US market session, the Dow Jones is testing Wednesday. The mid-week trading window has the DJIA about as balanced, with about half of the index’s constituents rising for the day. Salesforce ( CRM ) is rebounding from a recent slump, climbing 4% on Wednesday to test $282 per share.

On the downside, Nike ( NKE ) extended a short-term slide, falling more than 6% and retreating below $84 a share, as the shoemaker grapples with a bleak outlook. Nike reported a big drop in its earnings expectations for the first quarter of 2024, and the company’s CEO transition rattled investors.

Dow Jones Price Forecast

The Dow Jones is in a difficult technical consolidation zone between 42,400 and 42,200 on daily candles as buyers struggle with an index planted far too deep in bull country with little technical bounce. The Dow’s last drop to 40,000 in early September and subsequent 6.6% bottom-to-top rally has left price action in overbought territory, and short pressure will look for a retracement to the 50-day exponential moving average . (EMA) rising to 41,100.

Dow Jones Daily Chart