- The Dow Jones shed over 500 points in the midweek market session.
- Investors balked after US PMIs came in firmly mixed and key earnings missed.
- US Manufacturing set to slow further, but Services PMIs expanded.
The Dow Jones Industrial Average (DJIA) fell over 500 points on Wednesday after US Purchasing Managers Index (PMI) figures came in broadly mixed, entirely reversing course on forecasts. US equity markets pulled back, however rate markets still see 100% odds of a September rate cut from the Federal Reserve (Fed). Still, a lopsided economic data release will put additional pressure on upcoming calendar prints through the rest of the week.
July’s US Manufacturing PMI tumbled back into contraction territory for the first time since January, easing to 49.5 compared to the previous month’s 51.6 and flouting the forecast uptick to 51.7. Meanwhile, US Services PMI survey results surged to a 26-month high of 56.0 compared to the previous 55.3, and well above the forecast backslide to 54.4.
A mixed PMI print did little to support broad market sentiment, sending equities lower and investors bracing ahead of further key US data due this week. Thursday’s annualized Q2 Gross Domestic Product (GDP) is expected to rise to 2.0% from the previous 1.4%, while the QoQ GDP figure for Q2 is forecast to ease back to 2.6% from the previous 3.1%.
Friday’s Personal Consumption Expenditure Price Index (PCE) inflation will be the week’s critical data print. As the Fed’s preferred method of tracking inflation, a miss in core PCE Price Index could send investors heading for the hills or stepping further into risk-on bets on rate cut hopes. June’s YoY core PCE inflation is forecast to tick down slightly to 2.5% from 2.6%, with the MoM figure expected to hold steady at 0.1%.
Dow Jones news
Wide misses in earnings reports for key major stocks drove investors back in the back half of Wednesday's trading session, with steep declines in the Technology and Communication Services sectors.
Roughly two-thirds of the Dow Jones’ constituent securities were in the red on Wednesday, with losses being led through most of the day by Intel Inc. (INTC) which fell -3.8% to $31.70 per share. However, Visa Inc. (V) broke late to the downside, tumbling -4.0% on the day to $254.17 per share.
Dow Jones technical outlook
The Dow Jones is adding onto a recent pullback from all-time highs as the index slides back towards 40,000.00. The DJIA set a record peak bid of 41,371.38 last week, but the index is now trading down -3.5% in a brief pullback.
An extended pullback will see the Dow Jones challenging the 50-day Exponential Moving Average (EMA) at 39,472.52, with a long-term technical floor priced in at the 200-day EMA at 37,862.50.
Dow Jones daily chart
Dow Jones FAQs
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.
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.
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.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD remains weak and challenges the 200-day SMA
The selling pressure on AUD/USD showed no signs of easing, as the pair retreated for the eighth consecutive day, breaking below the critical 200-day SMA near 0.6580 and hitting new two-month lows.
EUR/USD: Extra pullbacks appear in the pipeline
EUR/USD added to Tuesday’s losses and deflated to two-week lows near the 1.0820 zone on the back of the late rebound in the Greenback and the broad-based weakness in the risk complex.
Gold retains modest gains ahead of key US headlines
Gold builds on Tuesday's recovery gains and trades above $2,420 on Wednesday. The pullback seen in the 10-year US Treasury bond yield and the US Dollar after US PMI data help XAU/USD stretch higher during the American trading hours.
Bitcoin perfectly reacting higher from Elliott Wave blue box area
In this technical blog, we will look at the past performance of the Daily Elliott Wave Charts of Bitcoin ticker symbol: $BTCUSD. We presented to members at the elliottwave-forecast. In which, the rally from the 21 November 2022 low is unfolding as an impulse structure.
Bank of Canada doubles down on monetary easing
The Bank of Canada (BoC) cut its policy rate by 25 bps to 4.50% at today's monetary policy announcement, following on from the initial rate cut it delivered in June. Just as important as the rate cut, the BoC offered dovish policy guidance, saying that “downside risks are taking on increased weight in our monetary policy deliberations.”