Dow Jones sheds 30 points on thin Monday after early pop fizzles

Dow Jones found early highs before settling back into the low end.
New trading week kicks things off with a breather after Friday’s NFP.
US consumer and wholesale inflation figures are due this week.

The Dow Jones Industrial Average (DJIA) whipped on Monday, briefly testing fresh highs and breaking out of Friday’s tight churn before slumping into the red for the new trading week. the major equity index closed Monday down 40 points from Friday's closing prices. Federal Reserve (Fed) Chairman Jerome Powell gives the first of a two-day Monetary Policy Report to the US Congress on Tuesday, with key US inflation figures slated for the back half of the trading week.

Fed Chair Powell will deliver the first half of his Monetary Policy Report to the Senate Banking Committee on Tuesday, followed by the same presentation to the House Committee on Financial Services on Wednesday. US Consumer Price Index (CPI) inflation is slated for Thursday, and US Producer Price Index (PPI) wholesale inflation is due Friday.

US inflation figures will be the key data print this week as investors look for signs of rate cuts from the Fed. Despite broad-market hopes for a rate trim, Fed officials have continued to lean into the wait for further evidence that inflation will ease back to the Fed’s 2% annual target. According to the CME’s FedWatch Tool, rate traders are pricing in nearly 80% odds of at least a quarter-point trim to the Fed funds rate on September 18, a little over ten weeks from now.

Waiting for this week’s inflation data will be tense. Core CPI for the year ended June is forecast to hold steady at 3.4% YoY, while core PPI inflation for the same period is expected to tick higher to 2.5% YoY from the previous 2.3% as inflationary pressures remain elevated at the producer-supplier level.

Dow Jones news

The Dow Jones index was mixed on Monday, with roughly half of the equity board’s constituent securities in the green for the day, but overall declines in key goods producers kept headline index prices subdued. Nike Inc. (NKE) fell -3.16% to $73.05 per share, extending into a fresh 52-week low and facing further declines as the shoe manufacturing giant sees growth problems for the year ahead as the footwear giant’s market share gets cannibalized by smaller, more strategic competitors.

Intel Corp. (INTC) surged on Monday, rising over 6% to $34.00 per share after a note from Melius Research analysts suggested that NVIDIA Corp. (NVDA) competitors like Intel and Advanced Micro Devices Inc. (AMD) could play significant catchup in the AI space with current sector giant NVIDIA.

Dow Jones technical outlook

The Dow Jones Industrial Average (DJIA) rallied in early Monday trading, tapping into a fresh seven-week high of 39,663.30 before a sharp downturn erased the day’s gains. The Dow Jones slid to an intraday low just south of 39,275.00. The major equity index remains down around one-tenth of one percent on Monday.

The Dow Jones has churned in familiar chart territory just above the 50-day Exponential Moving Average (EMA) at 38,983.20 since recovering from late May’s bottom near 38,000.00. Despite holding firmly in the high end, bullish momentum remains limited, and Dow Jones bidders have so far failed to develop the necessary momentum to drag bids back over all-time highs set above the 40,000.00 major price handle.

Dow Jones five minute chart

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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