Dow Jones Industrial Average is up after NFP

VaselineOctober 4, 2024

0 4 minutes read

Dow Jones Industrial Average is up after NFP

The Dow Jones regained ground in NFP on Friday, but still remains down for the week.
The US added far more jobs than expected in September.
Market hopes for further jumbo tapering from the Fed have collapsed.

The Dow Jones Industrial Average (DJIA) rose after US jobs numbers (NFP) beat expectations. US NFP net job growth rose to 254,000 on Friday, dampening market hopes for a second two-fold rate cut by the Federal Reserve (Fed) on November 7.

The U.S. unemployment rate fell back to 4.1 percent from 4.2 percent previously, further cementing a healthier-than-expected landscape in the U.S. labor market. Additionally, NFP releases for the past few months have seen healthy positive revisions. August’s previous NFP total was boosted by another 17,000, while July’s figure rose sharply by 55,000, bringing the total to 144,000.

Annual wage growth also picked up in September, rising 4.0% from 3.9% previously. Investors had expected September average hourly earnings growth to fall to 3.8 percent. With wages and net job additions beating expectations across the board, the rate market’s expectations of a higher pace of rate cuts had a huge impact to round out an average-to-best trading week.

According to CME’s FedWatch tool, rate traders’ expectations for the Fed’s November rate call fell after NFP; rate futures speculators now see a 95% chance the Fed will cut rates by a modest 25 bps on November 7, with the final 5% betting on no move in the Fed funds rate.

Dow Jones News

Despite a moderate recovery after a flash NFP print, the Dow Jones saw only a mild rally. The index rose largely on reaction to the US jobs numbers, rising nearly 400 points from the bottom, but the index settled for a more reasonable gain of 200 points.

Two-thirds of the Dow’s constituents rose on Friday, led by JPMorgan Chase ( JPM ). JPMorgan rose 3% on the day, climbing above $210 per share. On the downside, Home Depot ( HD ) returned 1% to $407 a share.

In other stock news, Amazon ( AMZN ) rose nearly 2% to $185 a share on Friday amid upbeat jobs data and a swift resolution to the East Coast dock workers’ strike.

Dow Jones Price Forecast

The Dow Jones is on an upward trajectory overall, approaching a crucial resistance level, while technical indicators suggest positive momentum in the market. The index is currently hovering around 42,200, a point where it previously faced selling pressure. traders are watching to see if the Dow can break through that resistance, a move that could open the door to further near-term gains.

Despite the overall positive trend, recent price movements reflect uncertainty. The daily candles have moved from bullish to bearish, indicating that the market is taking a break while testing the resistance level.

“We are currently at a critical moment in the market. A clear breakout above this resistance could generate renewed buying interest,” noted one technical analyst. “However, if the Dow fails to break this level, we may see a pullback to the moving averages.”

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.

VaselineOctober 4, 2024

0 4 minutes read