Dow Jones Industrial Average dips as US election, Fed rate cut loom

• Poll volatility keeps Wall Street cautious; VIX rises above 20.
• Nvidia to replace Intel, Sherwin-Williams to replace Dow in DJIA on November 8.
• Factory Orders drop more than expected.

The Dow Jones Industrial Average (DJIA) fell over 0.29% or 100 points in early trading during the North American session on Monday. The financial markets are expected to remain volatile this week as the US presidential election remains a tight race, and swings in the polls on Monday and Tuesday could spur volatility.

Elections in the United States are driving price action in the financial markets. Recent polls suggest that Democrat Vice President Kamala Harris and Republican former President Donald Trump are in a very close race to occupy the White House from 2024 to 2028. Consequently, Wall Street trades in the red, while the CBOE Volatility Index (VIX) rises above 20.00, an indication of increasing jitters.

In the meantime, US Treasury yields along the belly to the long end of the curve post losses, while the Greenback, as measured by the US Dollar Index (DXY), plunges 0.47% down to 103.84.

The US Census Bureau revealed that Factory Orders in September dropped -0.5% MoM, more than estimates of a -0.4% shrinkage but improved compared to August’s -0.8% contraction. The  US election and Thursday’s Federal Open Market Committee (FOMC) monetary policy decision overshadowed the data. The FOMC is expected to lower rates by 25 basis points (bps), and it will be followed by a press conference by Federal Reserve (Fed) Chair Jerome Powell.

The CME FedWatch Tool shows odds for a 25 bps rate cut by the Fed reaching 98%. This would leave rates in the 4.50%-4.75% range.

In addition to the above-mentioned events, the US economic docket will be busy with the release of the Balance of Trade, S&P and ISM Services PMIs, Initial Jobless Claims, and the University of Michigan (UoM) Consumer Sentiment.

Dow Jones news

In breaking news, Nvidia (NVDA) will replace Intel (INTC) in the Dow Jones. Index owner S&P writes, this change would “ensure a more representative exposure to the semiconductors industry.” In the same statement, S&P Dow Jones announced that Sherwin Williams (SHW) would replace Dow (DOW) in the materials sector. S&P revealed that the changes would be effective before the opening on Friday, November 8.

After the news broke, NVDA shares rose by 2%, while INTC tumbled over 4%. Shares of SHW jumped over 4% on news.

The Dow Jones stocks leading the pack are Home Depot (HD), which gained 0.50% to $394.55, followed by Boeing (BA), which was up 0.25% at $154.98, and Walmart (WMT), up a minimal 0.17% at $82.33. The main losers amid a dismal session for the DJIA were Intel, which was down 4.33% at $22.20, Dow, which lost 2.75% at $47.63, and UnitedHealth Group (UNH), which was down 1.66% at $558.15.

Dow Jones price forecast

The Dow Jones Industrial Average has fallen below the 42,000 threshold after hitting a two-day peak of 42,328. On its way down, the DJIA surpassed the 50-day Simple Moving Average (SMA) at 41,953, opening the door for further downside.

If the Dow Jones achieves a daily close below 42,000, sellers could push the index toward the August 30 high turned support at 41,574. On further weakness, the next stop would be the September 2 high turned support at 41,564, ahead of the 41,000 area.

If the Dow Jones posts a daily close above 42,000 buyers, it could remain hopeful of challenging the October 30 low, which turned resistance at 42,122. Once cleared, the next stop would be the October 31 high 42,460. On further strength, 42,500 could be reached before testing 43,000.

Oscillators point downward with the Relative Strength Index (RSI) preparing to push deeper into bearish territory but with enough room before turning oversold. Therefore, the DJIA path of least resistance is tilted to the downside.

Dow Jones daily chart