Dow Jones Industrial Average churns amid Monday whipsaw

• Dow Jones kicks off the new trading week with overcorrection in both directions.
• US data missed the mark on Monday, sparking a brief rally on rate cut hopes.
• Too-big of a dip in US data, plus a muddy election outlook, reignites recession fears.

The Dow Jones Industrial Average (DJIA) briefly rallied on Monday after a broad miss in key US data sparked a risk rally on renewed rate cut hopes. Still, the steep decline in manufacturing figures proved too much for investors to stomach. Equities gave up early gains and tumbled back into the day’s opening range.

June’s US ISM Manufacturing Purchasing Managers Index (PMI) broadly missed the mark on Monday, ticking down to 48.5 from the previous 48.7 and missing the forecast step up to 49.1. The economic indicator has spent a third consecutive month below the key 50.0 level, flashing ongoing warning signs of a broader slowdown creeping up within the US domestic economy.

ISM Manufacturing Prices Paid also declined in June, tumbling to a six-month low of 52.1 from the previous 57.0, falling well below the forecast decline to 55.9. With inflationary pressures easing, US markets initially jumped at the outset of the new trading week as investors continue to hope for softening economic figures to push the Federal Reserve (Fed) into an accelerated pace of rate cuts. However, too-steep of a drag in US data points could easily tip the US into a recession that rate cuts won’t overcome, sparking risk-off fears and trimming Monday’s early gains.

Dow Jones news

The Dow Jones is split down the middle on Monday, with half of the index’s constituent securities in the red for the day. Merck & Co Inc. (MRK) leads the gainers, climbing 3.5% and gaining 4.3 points to trade into $128.11 per share. On the low side, Unitedhealth Group Inc. (UNH) fell back 2.66%, falling 13.78 points to $495.48 per share.

Dow Jones technical outlook

Sideways churn is the name of the game for the Dow Jones as the major equity index grinds out a rough near-term lateral channel. The DJIA is cycling just above the 39,000.00 handle as bidders refuse to let the Dow decline but lack the necessary momentum to reclaim higher chart territory.

Daily candles continue to churn out a growing consolidation pattern as the Dow Jones gets strung along the 50-day Exponential Moving Average (EMA) at 38,908.22. The DJIA continues to hold on the high side of late May’s bottom near 38,000.00, but topside momentum remains unable to recover ground back to all-time highs set just north of the 40,000.00 major price handle in May.

Dow Jones five minute chart

Dow Jones daily chart