Dow Jones Industrial Average Forecast: DJIA outperforms NASDAQ, S&P 500 at Wednesday open
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CLAIM OFFER- Dow Jones index gained 0.85% on Tuesday, breaking above ascending triangle topline.
- DJIA lost 2.65% over the previous two weeks.
- US Treasury yields rise across the curve, especially longer maturity.
- 3M settles $6 billion lawsuit with US military personnel over faulty earplugs.
- Market awaits US PCE, Nonfarm Payrolls on Thursday and Friday.
Dow Jones Industrial Average (DJIA) is outperforming the NASDAQ Composite and the S&P 500 on Wednesday morning. A half hour into the session, the Dow Jones has gained 0.44%, while NASDAQ Composite and S&P 500 are up 0.3%.
Before the opening bell, another preliminary GDP print for the second quarter showed an annualized rate of 2.1%. This was lower than the prior 2.4% preliminary reading for the quarter ending in June and gave more credence to the belief in a soft landing for the US economy. Higher inflation readings from Germany and Spain early on Wednesday sent the S&P 500 and NASDAQ 100 futures lower, but the GDP print picked them back up.
The Dow index registered its best outing on Tuesday since August 7 as the 30-strong stock index rose 0.85%. The buoyant market developed in response to lower-than-expected JOLTS Job Openings data for July that showed a greater than 300K drop in US employment openings. Job Openings were at their lowest level in about two-and-a-half years.
Dow Jones News: 3M puts second major lawsuit behind it
A long-time constituent of the Dow – added in 1976 and now bearing an approximate 2.4% weighting – 3M Company (MMM) helped the index rise this week after the industrial’s board agreed to a $6 billion settlement stemming from US military veterans suing the manufacturer for combat earplugs they allege led to hearing loss.
3M stock rose 6.2% over the past week, and on Tuesday Wolfe Research upgraded the Dow constituent from Underperform to Peer Perform on the settlement. The research firm had earlier expected a settlement exceeding $10 billion and as high as $20 billion.
The earplug settlement comes after June’s $12.5 billion tentative settlement for the so-called “forever chemicals” known as PFAS that 3M developed and manufactured for years. The settlement would give cash payments to municipal water providers that alleged injury from the chemicals. That settlement was given preliminary approval by a judge on Tuesday, but other US states and individuals are yet to settle their suits.
By one estimation, there are more than 10,000 individuals represented by multiple law firms seeking restitution for PFAS-related injury. Some plaintiffs and observers have questioned whether the maker of Scotch tape and inventor of Post-It notes can remain solvent due to all its liabilities.
3M is already planning to spin off one of its healthcare units in order to free up cash to deal with settlement costs. The general consensus is that the company has made solid headway in dealing with the litigation so far. MMM stock has lost 50% of its value over the past five years.
Nonfarm Payrolls, PCE data fill up end of week schedule
US Personal Consumption Expenditures (PCE) data for July arrives on Thursday, and the market is hoping a preferred drop in inflation will boost confidence in the Federal Reserve stalling rate hikes for the rest of the year.
The market was already fairly certain that the central bank would keep interest rates stable at the September meeting, but as recently as early Tuesday, the majority believed a 25 basis point hike would arrive at the November meeting. Following the JOLTS data, however, the CME Group’s FedWatch Tool shows a 51% chance that rates remain unchanged in November as well.
This was good news for markets and helped the Dow add 0.85% on Tuesday. The US Bureau of Economic Analysis’s Thursday release of PCE data should undergird the JOLTS data. Everyone knows the PCE is the Fed’s favorite gauge of inflation. It has an outsized role in determining the central bank’s policy. Wall Street expects 0.2% core growth in the price index compared with June and 4.2% on an annualized basis. That annual figure is slightly higher than June’s 4.1% figure.
On Friday, August Nonfarm Payrolls for the US could upend the situation if they arrive above the consensus 170K figure. June’s 187K print arrived below consensus and heartened the market. Earlier prints in the year showed a red-hot job market that threatened to force the Fed’s hand into continuing its rate hikes. A figure below 170K could lead to a rally for the Dow index since it would seem to express the market’s wish for a soft landing narrative.
What they said about the market – Rod von Lipsey
UBS Private Wealth Management strategist Rod von Lipsey warned investors earlier this week to move away from mega cap tech stocks that have already produced huge gains this year. Better options could be found in less sexy and often ignored sectors of the market, he added.
"For investors looking to put new money to work in the stock market, we prefer areas of the market that have lagged in performance so far this year, which includes sectors like energy and consumer staples.”
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.
Dow Jones Industrial Average forecast
The Dow Jones index broke above the 34,712 resistance barrier that stems from the range high on December 13, 2022. Equally important the DJIA blasted through the topline of the ascending triangle that formed on August 16 of last year. The index already broke above that point on July 18 but then melted back below on August 17. The triangle formation has lost its significance, but a move above the top trendline is another reason to think this rally could continue.
Next up is the 35,200 level that forms the bottom of the supply zone that lasts through 35,750. This area had importance from October 2021 through April 2022. Below there is another demand zone that could support the index if another sell-off ensues. It runs from 34,250 to 34,600 and hails from the second half of 2022.
The Moving Average Convergence Divergence (MACD) indicator shows the index looks prepared to register a bullish crossover. Tuesday’s rally halted at the 21-day moving average, so a break above it on Wednesday should usher in further bullish price action.
Dow Jones Industrial Average daily chart
- Dow Jones index gained 0.85% on Tuesday, breaking above ascending triangle topline.
- DJIA lost 2.65% over the previous two weeks.
- US Treasury yields rise across the curve, especially longer maturity.
- 3M settles $6 billion lawsuit with US military personnel over faulty earplugs.
- Market awaits US PCE, Nonfarm Payrolls on Thursday and Friday.
Dow Jones Industrial Average (DJIA) is outperforming the NASDAQ Composite and the S&P 500 on Wednesday morning. A half hour into the session, the Dow Jones has gained 0.44%, while NASDAQ Composite and S&P 500 are up 0.3%.
Before the opening bell, another preliminary GDP print for the second quarter showed an annualized rate of 2.1%. This was lower than the prior 2.4% preliminary reading for the quarter ending in June and gave more credence to the belief in a soft landing for the US economy. Higher inflation readings from Germany and Spain early on Wednesday sent the S&P 500 and NASDAQ 100 futures lower, but the GDP print picked them back up.
The Dow index registered its best outing on Tuesday since August 7 as the 30-strong stock index rose 0.85%. The buoyant market developed in response to lower-than-expected JOLTS Job Openings data for July that showed a greater than 300K drop in US employment openings. Job Openings were at their lowest level in about two-and-a-half years.
Dow Jones News: 3M puts second major lawsuit behind it
A long-time constituent of the Dow – added in 1976 and now bearing an approximate 2.4% weighting – 3M Company (MMM) helped the index rise this week after the industrial’s board agreed to a $6 billion settlement stemming from US military veterans suing the manufacturer for combat earplugs they allege led to hearing loss.
3M stock rose 6.2% over the past week, and on Tuesday Wolfe Research upgraded the Dow constituent from Underperform to Peer Perform on the settlement. The research firm had earlier expected a settlement exceeding $10 billion and as high as $20 billion.
The earplug settlement comes after June’s $12.5 billion tentative settlement for the so-called “forever chemicals” known as PFAS that 3M developed and manufactured for years. The settlement would give cash payments to municipal water providers that alleged injury from the chemicals. That settlement was given preliminary approval by a judge on Tuesday, but other US states and individuals are yet to settle their suits.
By one estimation, there are more than 10,000 individuals represented by multiple law firms seeking restitution for PFAS-related injury. Some plaintiffs and observers have questioned whether the maker of Scotch tape and inventor of Post-It notes can remain solvent due to all its liabilities.
3M is already planning to spin off one of its healthcare units in order to free up cash to deal with settlement costs. The general consensus is that the company has made solid headway in dealing with the litigation so far. MMM stock has lost 50% of its value over the past five years.
Nonfarm Payrolls, PCE data fill up end of week schedule
US Personal Consumption Expenditures (PCE) data for July arrives on Thursday, and the market is hoping a preferred drop in inflation will boost confidence in the Federal Reserve stalling rate hikes for the rest of the year.
The market was already fairly certain that the central bank would keep interest rates stable at the September meeting, but as recently as early Tuesday, the majority believed a 25 basis point hike would arrive at the November meeting. Following the JOLTS data, however, the CME Group’s FedWatch Tool shows a 51% chance that rates remain unchanged in November as well.
This was good news for markets and helped the Dow add 0.85% on Tuesday. The US Bureau of Economic Analysis’s Thursday release of PCE data should undergird the JOLTS data. Everyone knows the PCE is the Fed’s favorite gauge of inflation. It has an outsized role in determining the central bank’s policy. Wall Street expects 0.2% core growth in the price index compared with June and 4.2% on an annualized basis. That annual figure is slightly higher than June’s 4.1% figure.
On Friday, August Nonfarm Payrolls for the US could upend the situation if they arrive above the consensus 170K figure. June’s 187K print arrived below consensus and heartened the market. Earlier prints in the year showed a red-hot job market that threatened to force the Fed’s hand into continuing its rate hikes. A figure below 170K could lead to a rally for the Dow index since it would seem to express the market’s wish for a soft landing narrative.
What they said about the market – Rod von Lipsey
UBS Private Wealth Management strategist Rod von Lipsey warned investors earlier this week to move away from mega cap tech stocks that have already produced huge gains this year. Better options could be found in less sexy and often ignored sectors of the market, he added.
"For investors looking to put new money to work in the stock market, we prefer areas of the market that have lagged in performance so far this year, which includes sectors like energy and consumer staples.”
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.
Dow Jones Industrial Average forecast
The Dow Jones index broke above the 34,712 resistance barrier that stems from the range high on December 13, 2022. Equally important the DJIA blasted through the topline of the ascending triangle that formed on August 16 of last year. The index already broke above that point on July 18 but then melted back below on August 17. The triangle formation has lost its significance, but a move above the top trendline is another reason to think this rally could continue.
Next up is the 35,200 level that forms the bottom of the supply zone that lasts through 35,750. This area had importance from October 2021 through April 2022. Below there is another demand zone that could support the index if another sell-off ensues. It runs from 34,250 to 34,600 and hails from the second half of 2022.
The Moving Average Convergence Divergence (MACD) indicator shows the index looks prepared to register a bullish crossover. Tuesday’s rally halted at the 21-day moving average, so a break above it on Wednesday should usher in further bullish price action.
Dow Jones Industrial Average daily chart
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