- Dow Jones drops over 1.40% to 43,980 as investor sentiment weakens.
- The US Dollar Index retreats below 106.90 after Trump hints at a potential trade deal with China.
- US Initial Jobless Claims miss estimates, raising concerns about labor market resilience.
- St. Louis Fed warns of inflation risks, while Atlanta Fed’s Bostic sees room for two rate cuts this year.
The Dow Jones Industrial Average (DJIA), which measures the performance of 30 large-cap US stocks, fell sharply on Thursday, dropping more than 1.40% to 43,980. Investors reacted to mixed economic data and cautious remarks from Federal Reserve (Fed) officials. The labor market showed signs of weakness, while the possibility of a United States (US)-China trade deal helped ease concerns over upcoming tariffs.
Daily digest market movers: Dow Jones tumbles as economic concerns grow
- The Dow extended losses as market participants digested weaker-than-expected weekly jobless claims.
- Initial Jobless Claims rose to 219,000, exceeding estimates of 215,000 and higher than the previous 214,000.
- Continuing Jobless Claims climbed to 1.869 million, surpassing forecasts and the previous 1.845 million.
- The Philadelphia Fed Manufacturing Survey printed at 18.1, below expectations of 20 and January’s 44.3.
- US President Donald Trump hinted at a potential trade deal with China, easing concerns over April’s tariff hikes.
- The US Dollar Index (DXY) fell below 106.90 following Trump’s comments, signaling reduced demand for safe-haven assets.
- St. Louis Fed President Alberto Musalem warned of rising inflation expectations and the risk of stagflation.
- Atlanta Fed President Raphael Bostic reiterated that two rate cuts remain possible this year, depending on economic conditions.
- The Dow remains under selling pressure, struggling to regain key technical levels after breaking below 44,000.
Technical Analysis
The Dow Jones Industrial Average has fallen below 44,000, accelerating downside momentum. The break below the 20-day SMA at 44,580 confirms a bearish trend, with sellers gaining control. If the index fails to hold above 43,900, further declines toward the 100-day SMA around 43,480 could follow. A recovery above 44,200 is needed to ease immediate selling pressure.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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