Dow Jones Industrial Average declines further on extended drop in producer inflation

• Dow Jones backslides over 150 points on Thursday.
• Treasury yields and equities backslid after US PPI figures declined.
• US Initial Jobless Claims also rose faster than expected, sparking recession concerns.

The Dow Jones Industrial Average (DJIA) tumbled another 150-plus points on Thursday after US data hinted at a further contraction of the overall economy, briefly sparking risk-off bids into the US Dollar (USD) and forcing Treasury yields lower alongside equity indexes. 

US Producer Price Index (PPI) inflation eased faster than expected in May, contracting -0.2% MoM compared to the forecast move lower to 0.1% from 0.5%. Annualized Core PPI also ticked down to 2.3% YoY, falling from the forecast steady print at 2.4%.

US Initial Jobless Claims also rose faster than expected for the week ended June 7, rising to 242K versus the forecast 225K and the previous 229K. Declining producer-level inflation and rising unemployment benefits seekers are exposing cracks in the US economy, reigniting fears of a possible recession looming ahead. 

Investor sentiment is on the ropes on Thursday after the Federal Reserve (Fed) held rates on Wednesday and cautioned that the US central bank only expects to make a single rate cut in 2024, down from the three initially forecast in March. Risk-off flows are sapping strength out of equity indexes heading into the tail-end of the trading week, though momentum could flip back to the bullish side. According to the CME’s FedWatch Tool, rate traders are pricing in nearly-even odds of a first quarter-point rate trim in either September or November, with rate markets pricing in a 76% chance of a quarter-point rate cut on September 18.

Dow Jones news

Two-thirds of the Dow Jones index is underwater on Thursday, with losses being led by Salesforce Inc. (CRM) which declined -2.16% to $230.71 per share. On the high side, JPMorgan Chase & Co. (JPM) is recovering from a recent selloff, climbing 0.92% to $193.34 per share.

Dow Jones technical outlook

The Dow Jones is grappling with an intraday recovery from the day’s early lows near 38,393.00, as DJIA bidders try to force action back above the 38,600.00 level. US equities are grinding out a slow recovery from Thursday’s early declines, pulling back into the trading week’s range after setting a brief new low for the week.

The Dow Jones is on pace for a third consecutive down day, but price action continues to hold above a near-term demand zone below the 38,000.00 handle. The index remains down nearly 4% from all-time highs above 40,000.00, but is still decidedly bullish in 2024, up 2.3% from January’s opening bids.

Dow Jones five minute chart

Dow Jones daily chart