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- Dow Jones Industrial Average sets new record high before retreating on Friday
Dow Jones Industrial Average sets new record high before retreating on Friday
- The Dow Jones clipped a new record high bid to round out the trading week.
- US PCE inflation held steady in July, teasing investors without giving further hope.
- Coming up next week: US long weekend, PMI figures, and another NFP print.
The Dow Jones Industrial Average (DJIA) tipped into a fresh record intraday high on Friday, echoing Monday’s record-setting bidding action. However, investors pulled back from the brink after US inflation data kept rate cut bets on the rails.
US Personal Consumption Expenditure Price Index (PCE) figures for July didn’t deliver any notable surprises to round out the trading week. MoM US core PCE inflation held steady at 0.2%, as expected, but the YoY core PCE inflation figure held steady at 2.5% versus the anticipated move up to 2.6%.
Rate markets are holding firmly to 30% odds of an initial double cut for 50 bps from the Federal Reserve (Fed) on September 18, with the remaining 70% leaning into a single quarter-point cut. Overall, rate traders are pricing in 100 bps in total cuts in 2024, according to CME’s FedWatch Tool.
With PCE inflation data out of the way and not giving any warning signs, the way is paved to next week’s Nonfarm Payrolls (NFP) print, one of the last key pieces of economic data standing in the way of the Fed and rate-cut-hungry markets. Next week will also open on a quiet note, with US exchanges slated to remain shuttered for the Labor Day holiday. Some Purchasing Managers Index (PMI) releases are also scattered throughout the trading week.
Dow Jones news
It’s been a mixed bag for the Dow Jones on Friday. Roughly half of the index’s constituent securities are in the green for the day, and the DJIA eked out a fresh all-time intraday high of 41,497 before easing back to the day’s opening bids. On the low end, Salesforce (CRM) backslid 1.8%, falling to $252.35 per share, while American Express (AXP) contracted a little over 1%, easing to $252.25.
On the high side, Intel (INTC) rallied over 9% at its peak, surging to its highest bids in nearly a month after rumors emerged the company is looking to pivot some of its core operations into more profitable sectors.
Dow Jones price forecast
Bullish momentum continues to strain against its tether, keeping the Dow Jones testing new record highs and keeping price action pinned deep in bull country. The index is trading well north of the 200-day Exponential Moving Average (EMA) at 38,513, and the nearest technical floor in place to catch a downside correction is parked at the 50-day EMA just above the 40,000 major price handle.
The Dow Jones has climbed over 8% from August’s deep swing low to 38,382, touching new record highs twice in a single week. Despite closing in the green for three straight weeks, topside momentum is starting to wane, and bidders might want to watch out for a transitional period giving way to a fast drop that could gain speed as it kicks out near-term stops.
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.
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