The Dow Jones Rallies 200 Points as Investors Regain Footing
The Dow Jones Industrial Average rebounded around 200 points on Thursday, with investors reinvigorated after US economic data eased rising fears of an economic slowdown. A better-than-expected Durable Goods Orders print has assuaged fears that the Federal Reserve (Fed) might have aggressively cut rates last week in response to a deteriorating economic outlook. However, investors will still be keeping a close eye on monthly jobs report figures in the coming weeks.
US Economic Data Soothes Recession Concerns
- US Durable Goods Orders held flat at 0.0% in August, beating the forecast of a 2.6% contraction.
- Initial Jobless Claims for the week ended September 20 also beat forecasts, printing at 218K versus the expected 225K.
The recent 50 bps rate cut by the Federal Reserve (Fed) has caused some concerns in global markets. Some investors are worried that the large rate cut might be a response to a potential economic slowdown in the US. However, Fed Chair Jerome Powell stated last week that the rate cut was not a hasty reaction to signs of a recession, but rather a proactive measure to support the US labor market.
Market Reaction and Future Outlook
US Durable Goods Orders and week-on-week Initial Jobless Claims helped to bolster the Fed head’s case, with both figures printing better than expected and the “soft landing” economic rhetoric holding steady. However, Friday’s Personal Consumption Expenditure (PCE) inflation print will draw plenty of attention, and will be the real test of last week’s Fed rate cut.
Dow Jones News
The Dow Jones is tilted firmly into the bullish side on Thursday, with over two-thirds of the equity index firmly planted in the green. Caterpillar (CAT) is trading firmly higher on the day, rising 3.3% near $391 per share following reports that China has unveiled another massive stimulus package meant to reinvigorate the Chinese housing and construction industries, a move that Caterpillar is widely expected to benefit from.
Dow Jones Price Forecast
Despite Thursday’s bullish tilt, the Dow Jones is struggling to make headway after the midweek’s bearish pullback. Still, price action is within arm’s reach of recent all-time highs, and bidders will have their sights set on the next leg up.
Dow Jones buyers have stubbornly staked their claim on the 42,000 handle, shrugging off signs of overbought conditions. On the low side, sellers will be looking to drag the equity board back down toward the 50-day Exponential Moving Average (EMA) near 40,870.
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. 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.
- Factors Driving the Dow Jones:
- Company earnings reports
- US and global macroeconomic data
- Interest rates set by the Federal Reserve (Fed)
- Inflation and other metrics influencing Fed decisions
- Dow Theory:
- Developed by Charles Dow to identify stock market trends
- Compares the direction of the Dow Jones Industrial Average and Transportation Average
- Uses elements of peak and trough analysis
- Trading the DJIA:
- ETFs, futures contracts, and options provide different ways to trade the index
- Mutual funds offer exposure to a diversified portfolio of DJIA stocks