Dow Jones Industrial Average slips backwards on pullback Tuesday

11/12/2024 20:29:27 GMT|ByJoshua Gibson

The Dow Jones is taking a breather as bids grapple with 44,000.
Post-election rally pauses, but with little retracement on the cards.
US CPI inflation data due Wednesday to drive momentum.

The Dow Jones Industrial Average shed around 300 points on Tuesday, marking out territory near the 44,000 handle as equities take a brief pause from the post-election rally that sent the Dow Jones into fresh record highs. The major equity index surged above 44,000 last week after former President Donald Trump appeared to sweep to a stunning election win, sending investors into a frenzy as they bought whatever they could find.

Now that the Dow Jones is up over 18% in 2024 alone, the post-election glut is taking a pause as investors weigh wether or not equities are encroaching on oversold territory. The DJIA is on pace to chalk in its strongest month since November of last year, when the equity board added nearly 9% in a four-week period. The Dow Jones is now up over 5.5% this November, and one-sided equity traders are taking a breather as US Consumer Price Index (CPI) inflation figures loom around the corner.

US CPI inflation figures for the month of October are slated to release on Wednesday, and markets are expecting a rebound in annualized headline consumer price growth. Full-fat CPI inflation is forecast to tick higher to 2.6% YoY compared to September’s print of 2.4%. Core CPI inflation is expected to hold steady at 3.3% YoY. The monthly figure for both inflation categories are broadly expected to hold flat month-on-month.

Dow Jones news

Tuesday’s pause in the broad-market rally has roughly two-thirds of the Dow Jones testing into the red on the day. Losses were led by 3M (MMM) and Boeing (BA), each falling a little under 3% from the day’s opening prices. 3M eased below $130 per share, while Boeing slipped back underneath $145 per share.

On the high side, Honeywell International (HON) rose nearly 3% and climbed over $231.50 per share. This week, it was revealed that activist investment holdings firm Elliott Management has taken a significant stake in Honeywell, bolstering market confidence in the tech company’s outlook.

Elliott Management has submitted a letter to Honeywell’s board proposing a major restructuring of the company. They suggest that Honeywell should split into two independent entities. Elliott believes that this separation could increase Honeywell's share price by 51% to 75% over the next two years.

Dow Jones price forecast

Thin losses on Tuesday have crimped the Dow Jones’ mostly one-sided November chart action, though the major equity index is still holding onto bullish territory north of 44,000. Early November sparked a bullish extension after price action gave a clean bounce off of the 50-day Exponential Moving Average (EMA) back when bids and the key moving average mixed near the 42,000 handle.

Dow Jones daily chart

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

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