Dow Jones Industrial Average flattens despite broad-market sentiment recovery
- Dow Jones churns close to flat on Wednesday as index gets left out of bull run.
- Dow Jones struggles as other US equity indexes climb into fresh record highs.
- US data broadly softened, sparking a risk rally on heightened rate cut hopes.
The Dow Jones Industrial Average (DJIA) failed to capitalize on a broad-market uptick in risk appetite on Wednesday. Other US equity indexes climbed into fresh all-time highs, but the DJIA floundered close to the day’s opening bids.
US data broadly softened on Wednesday, sparking a lopsided bull run in market sentiment after easing economic figures helped to bolster rate cut hopes back into the high end. US ADP Employment Change in June fell to 150K compared to the forecast increase to 160K from the previous month’s revised 157K. Looking into the finer details of ADP’s employment report, further softness is found; the overwhelming majority of job gains for the period were in lower-paying leisure and hospitality positions.
US Initial Jobless Claims also ticked higher to 238K for the week ended June 28, rising from the previous 233K and bolstering the four-week average to 238.5K. The June ISM Services Purchasing Managers Index (PMI) activity survey also eased, falling to a multi-year low of 48.8. This is the indicator’s lowest reading since June of 2020, and entirely missed the forecast decline to 52.5 from the previous 55.1.
Read more: FOMC Minutes left the door open to rate hikes if inflation picks up pace
The Federal Reserve (Fed) continues to lean firmly into a cautious tone on monetary policy, and the Federal Open Market Committee’s (FOMC) latest Meeting Minutes showed that the US central bank continues to urge caution on declaring victory over inflation. However, policymakers have nodded the head toward improving price growth figures recently, and the FOMC’s internal discussions noted a slowing in US economic data.
Dow Jones news
The Dow Jones is entirely mixed on Wednesday, with half of the index’s constituent securities in the red on an otherwise risk-on trading day. Losses are being led by Unitedhealth Group Inc. (UNH), which fell below $490.00 per share, declining -1.68%. On the high side, Salesforce Inc. (CRM) is testing $261.00 per share, gaining 1.86% on Wednesday and climbing nearly five points.
Dow Jones technical outlook
The Dow Jones Industrial Average continues to churn in familiar middle ground, cycling in a rough consolidation range just above 39,000.00. The index briefly recovered into a near-term high above 39,500.00 early last week, but bidders have run out of gas.
Daily candlesticks find technical support from the 50-day Exponential Moving Average (EMA) at 38,936.00, but topside momentum remains thin as the Dow Jones treads water on the high end of a near-term recovery from May’s sharp correction into 38,000.00.
Dow Jones five minute chart
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.