- The Dow Jones climbed over 500 points on Thursday after upbeat US data print.
- US Retail Sales surged to 18-month high in July.
- Upbeat US data sloughs off recession fears, but tempers rate cut bets.
The Dow Jones Industrial Average (DJIA) gained north of 500 points on Thursday, climbing around 1.3% on the day as equities tipped into the bullish side after US Retail Sales surged well above forecasts. Markets are shedding recent fears of a recession in the US economy, bolstering risk appetite and sending indexes broadly higher.
However, not all is rosy in financial markets post-Retail Sales. According to the CME’s FedWatch Tool, rate markets are now pricing in just 25% odds of a 50 bps double cut from the Federal Reserve (Fed) in September, down significantly from last week’s peak bets of 70% odds. Rate traders have still fully priced in a September rate trim as a done deal, with 75% odds of at least 25 basis points off of the top on September 18.
Dow Jones news
The Dow Jones is broadly higher on Thursday, with all but four of the index’s listed securities testing into the green for the day. Only four stocks on the board are seeing red, with losses being led by Verizon Communications Inc. (VZ) which fell -1.87% to $40.13 per share.
The DJIA is getting dragged higher by firm gains from key listed companies, including Cisco Systems Inc. (CSCO) and Walmart Inc. (WMT). Cisco Systems is extending into a second day of gains after a solid earnings beat this week, rising 7.1% on Thursday to $48.67 per share. Walmart is seeing an earnings beat of its own on Thursday, climbing 6.5% to $73.14 per share after broadly beating growth forecasts.
Read more:
Walmart earnings and guidance impress, helping lead Dow Jones higher
Cisco earnings surprise Wall Street with fiscal Q4 earnings beat
Dow Jones price forecast
Thursday’s upswing puts the Dow Jones to close in the green for a third straight day, climbing even higher above the 40,000.00 handle after a recent plunge into near-term leans below 38,500.00. Price action is trading north of the 50-day Exponential Moving Average (EMA) as bulls return to the fold in force, and bidding continues to drive prices back towards all-time highs above 41,250.00 set in July.
Dow Jones daily chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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