Dow Jones Industrial Average Forecast: In Wednesday's major sell-off, DJIA held up compared to S&P 500, NASDAQ
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CLAIM OFFER- Stocks sink on Tuesday as Alphabet sells off 9.5% on slowing cloud growth.
- Preliminary US GDP growth for Q3 will be released on Thursday.
- Dow Jones Industrial Average lost 1.61% last week and is largely flat through Wednesday of this week.
- PCE inflation results for September arrive on Friday to tell the market how so to expect cuts.
- Visa, 3M, Dow, Verizon, Microsoft, Coca-Cola already released earnings results this week.
The Dow Jones Industrial Average (DJIA) lost just 0.3% on Wednesday, while the rest of the market turned in a much worse report card. The S&P 500 and NASDAQ Composite sold off 1.4% and 2.4%, respectively.
The major news was that Alphabet (GOOGL) reported slower cloud revenue growth than expected in its quarterly earnings release late Tuesday. That sent the search giant's share price down 9.5% on Wednesday. Luckily for Dow Jones investors, however, Alphabet is not a component of the index. Rather, Microsoft (MSFT) is a member, and that software heavyweight jumped as much as 4.5% on Wednesday after posting major beats on the top and bottom lines. Microsoft ended Wednesday up 3.1%.
A number of Dow components have already reported successful quarters this week. Coca-Cola (KO), 3M (MMM), Visa (V) and Verizon (VZ) also benefited from solid results, which should help the Dow Jones index in future weeks as long as macro indicators oblige.
Dow Jones News: Microsoft, 3M, Visa earnings lead DJIA gains
Microsoft is the second-largest component of the Dow Jones, accounting for about 6.6% of the index. That is definitely a nice weighting when the software behemoth decides to beat its fiscal Q1 2024 earnings consensus by nearly 13% as it did late Tuesday. Revenue also beat the average forecast by 3.6%, owing in no small part to its Azure cloud business. The segment that houses Azure saw revenue rise 29% YoY.
3M stock, which got things started on Tuesday morning, rose 5.2% on the back of a 14% earnings beat above consensus for the third quarter. The major news was that the industrial conglomerate raised its full-year earnings outlook from $8.90 to $9.10. 3M makes up 1.8% of the Dow Jones index.
Verizon, which takes up 0.7% of the index, spiked 9% on Tuesday despite a mixed quarter. Missing on consensus revenue ever so slightly, Verizon cheered up the market by raising its free cash flow guidance by a cool $1 billion to $18 billion for the current fiscal year.
Visa, which makes up 4.7% of the Dow index, just barely beat market consensus for the quarter on both earnings and revenue. However, the payments powerhouse raised its dividend by 15.6% and announced a $25 billion buyback policy.
Coca-Cola, which comprises 1.1% of the index, saw organic sales jump on higher pricing power. Additionally, revenue growth in Latin America grew 24% from a year earlier. Earnings beat the consensus by 7%, and revenue came in $580 million above expectations.
Dow (DOW), which makes up just under 1% of the DJIA, beat consensus on adjusted EPS but missed on GAAP EPS. Revenue came in above expectations, but net sales fell 24% from a year ago due to the cyclicality of its business and lower volumes in its hydrocarbon business.
GDP, PCE round out the week ahead
On Thursday, Preliminary US GDP data for Q3 will be released at 12:30 GMT. A good figure could drive the Dow Jones index higher as many of its components react starkly to the US economy. Economists are optimistic for the third quarter though.
The consensus calls for the quarter to double the annualized rate of Q2. Consensus for Q3 comes in at 4.2% annualized economic growth in the US compared with the second quarter’s 2.1% reading.
Also on Thursday, Initial Jobless Claims for the week ending October 20 are expected to climb from 198K to 208K.
The vast majority of traders are betting that the Federal Reserve does not raise rates at the November 1 meeting next week. The expectation for now is that rates will remain flat through year-end. What could alter sentiment is the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditures (PCE) data.
On Friday at 12:30 GMT, Consensus expects the Core PCE print at an annual 3.7% for September. This would be welcome news after August’s 3.9% print. Monthly Core PCE is expected to drop from 0.4% to 0.3% from August.
Dow Jones FAQs
What is the Dow Jones?
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by 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 later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
What factors impact the Dow Jones Industrial Average?
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
What is Dow Theory?
Dow Theory is a method for 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 follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
How can I trade the DJIA?
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable 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 enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
What they said about the market – Jim Lebenthal
Jim Lebenthal, chief equity strategist at Cerity Partners, told Seeking Alpha on Monday that positive earnings results are being ignored by the market in favor of interest rates and Treasury yields. Lebenthal thinks that Powell is already favoring an end to all rate hikes but that he wants to be completely certain before he changes direction.
“We've got a couple more months of what appears to be a lousy investing environment, but when the Fed signals it's done, that investment environment changes.”
Dow Jones Industrial Average forecast
The Dow Jones Industrial Average is positioned for further losses as it has been in a swoon since July. The weekly chart below shows that the index is now trading beneath the 4-week Simple Moving Average (SMA). If there is any positive technical aspect to look at, there might be some buying now that the DJIA has reached a wide support band that spans from 32,500 to 33,000. Other than March’s plunge, the band has pushed all the pullbacks back up since December 2022, so it could again act as a true floor this time around.
Any break below 32,500 though could lead to the March low near 31,430. It did not help matter that last week the DJIA collapsed 1.61% despite taking a stab at an uptrend reversal.
Still, last week did see the highest highs in four weeks. Bulls should focus on regaining the 4-week SMA in the immediate future, but it could be a while before the index makes a run back to the 34,300 to 34,700 resistance band.
Dow Jones Industrial Average weekly chart
- Stocks sink on Tuesday as Alphabet sells off 9.5% on slowing cloud growth.
- Preliminary US GDP growth for Q3 will be released on Thursday.
- Dow Jones Industrial Average lost 1.61% last week and is largely flat through Wednesday of this week.
- PCE inflation results for September arrive on Friday to tell the market how so to expect cuts.
- Visa, 3M, Dow, Verizon, Microsoft, Coca-Cola already released earnings results this week.
The Dow Jones Industrial Average (DJIA) lost just 0.3% on Wednesday, while the rest of the market turned in a much worse report card. The S&P 500 and NASDAQ Composite sold off 1.4% and 2.4%, respectively.
The major news was that Alphabet (GOOGL) reported slower cloud revenue growth than expected in its quarterly earnings release late Tuesday. That sent the search giant's share price down 9.5% on Wednesday. Luckily for Dow Jones investors, however, Alphabet is not a component of the index. Rather, Microsoft (MSFT) is a member, and that software heavyweight jumped as much as 4.5% on Wednesday after posting major beats on the top and bottom lines. Microsoft ended Wednesday up 3.1%.
A number of Dow components have already reported successful quarters this week. Coca-Cola (KO), 3M (MMM), Visa (V) and Verizon (VZ) also benefited from solid results, which should help the Dow Jones index in future weeks as long as macro indicators oblige.
Dow Jones News: Microsoft, 3M, Visa earnings lead DJIA gains
Microsoft is the second-largest component of the Dow Jones, accounting for about 6.6% of the index. That is definitely a nice weighting when the software behemoth decides to beat its fiscal Q1 2024 earnings consensus by nearly 13% as it did late Tuesday. Revenue also beat the average forecast by 3.6%, owing in no small part to its Azure cloud business. The segment that houses Azure saw revenue rise 29% YoY.
3M stock, which got things started on Tuesday morning, rose 5.2% on the back of a 14% earnings beat above consensus for the third quarter. The major news was that the industrial conglomerate raised its full-year earnings outlook from $8.90 to $9.10. 3M makes up 1.8% of the Dow Jones index.
Verizon, which takes up 0.7% of the index, spiked 9% on Tuesday despite a mixed quarter. Missing on consensus revenue ever so slightly, Verizon cheered up the market by raising its free cash flow guidance by a cool $1 billion to $18 billion for the current fiscal year.
Visa, which makes up 4.7% of the Dow index, just barely beat market consensus for the quarter on both earnings and revenue. However, the payments powerhouse raised its dividend by 15.6% and announced a $25 billion buyback policy.
Coca-Cola, which comprises 1.1% of the index, saw organic sales jump on higher pricing power. Additionally, revenue growth in Latin America grew 24% from a year earlier. Earnings beat the consensus by 7%, and revenue came in $580 million above expectations.
Dow (DOW), which makes up just under 1% of the DJIA, beat consensus on adjusted EPS but missed on GAAP EPS. Revenue came in above expectations, but net sales fell 24% from a year ago due to the cyclicality of its business and lower volumes in its hydrocarbon business.
GDP, PCE round out the week ahead
On Thursday, Preliminary US GDP data for Q3 will be released at 12:30 GMT. A good figure could drive the Dow Jones index higher as many of its components react starkly to the US economy. Economists are optimistic for the third quarter though.
The consensus calls for the quarter to double the annualized rate of Q2. Consensus for Q3 comes in at 4.2% annualized economic growth in the US compared with the second quarter’s 2.1% reading.
Also on Thursday, Initial Jobless Claims for the week ending October 20 are expected to climb from 198K to 208K.
The vast majority of traders are betting that the Federal Reserve does not raise rates at the November 1 meeting next week. The expectation for now is that rates will remain flat through year-end. What could alter sentiment is the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditures (PCE) data.
On Friday at 12:30 GMT, Consensus expects the Core PCE print at an annual 3.7% for September. This would be welcome news after August’s 3.9% print. Monthly Core PCE is expected to drop from 0.4% to 0.3% from August.
Dow Jones FAQs
What is the Dow Jones?
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by 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 later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
What factors impact the Dow Jones Industrial Average?
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
What is Dow Theory?
Dow Theory is a method for 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 follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
How can I trade the DJIA?
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable 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 enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
What they said about the market – Jim Lebenthal
Jim Lebenthal, chief equity strategist at Cerity Partners, told Seeking Alpha on Monday that positive earnings results are being ignored by the market in favor of interest rates and Treasury yields. Lebenthal thinks that Powell is already favoring an end to all rate hikes but that he wants to be completely certain before he changes direction.
“We've got a couple more months of what appears to be a lousy investing environment, but when the Fed signals it's done, that investment environment changes.”
Dow Jones Industrial Average forecast
The Dow Jones Industrial Average is positioned for further losses as it has been in a swoon since July. The weekly chart below shows that the index is now trading beneath the 4-week Simple Moving Average (SMA). If there is any positive technical aspect to look at, there might be some buying now that the DJIA has reached a wide support band that spans from 32,500 to 33,000. Other than March’s plunge, the band has pushed all the pullbacks back up since December 2022, so it could again act as a true floor this time around.
Any break below 32,500 though could lead to the March low near 31,430. It did not help matter that last week the DJIA collapsed 1.61% despite taking a stab at an uptrend reversal.
Still, last week did see the highest highs in four weeks. Bulls should focus on regaining the 4-week SMA in the immediate future, but it could be a while before the index makes a run back to the 34,300 to 34,700 resistance band.
Dow Jones Industrial Average weekly chart
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