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Dow Jones sets new record before falling back on Friday

Posted on by Vaseline

  • The Dow Jones reached a new record to close the trading week.
  • US PCE inflation remained flat in July, which did not exactly cheer investors.
  • Next week: long weekend in the US, PMI figures and another NFP print.

The Dow Jones Industrial Average (DJIA) hit a new intraday high on Friday, echoing Monday’s record-breaking bid action. However, investors retreated from the brink after U.S. inflation data kept rate cuts on track.

The US Personal Consumption Expenditure Price Index (PCE) figures for July provided no notable surprises to close 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%, compared to the expected increase to 2.6%.

Rate markets are firmly holding on to a 30% chance of an initial 50bps double cut by the Federal Reserve (Fed) on September 18, with the remaining 70% leaning toward a single quarter-point cut. Overall, rate traders are pricing in 100bps of total cuts in 2024, according to CME’s FedWatch Tool.

With the PCE inflation data out of the way and no warning signs, the stage is set for next week’s Nonfarm Payrolls (NFP) print, one of the last major economic data points to stand in the way of the Fed and rate-hungry markets. Next week is also off to a quiet start, with U.S. markets closed for the Labor Day holiday. Some Purchasing Managers Index (PMI) releases are also spread out throughout the trading week.

Dow Jones News

It was a mixed bag for the Dow Jones on Friday. About half of the index’s constituent stocks are in the green for the day, with the DJIA hitting a new all-time intraday high of 41,497 before falling back to the day’s opening bids. On the downside, Salesforce ( CRM ) fell 1.8% to $252.35 per share, while American Express ( AXP ) fell just over 1% to $252.25.

Intel (INTC) rose more than 9% at the peak, reaching its highest bids in nearly a month after rumors surfaced that the company is looking to shift some of its core businesses into more profitable sectors.

Dow Jones Price Prediction

Bullish momentum continues to pull on its tether, pushing the Dow Jones to test new record highs and keeping price action locked deep in bullland. The index is trading well above its 200-day exponential moving average (EMA) at 38,513, and the nearest technical floor to catch a downside correction is parked at the 50-day EMA just above the 40,000 key price handle.

The Dow has risen more than 8% from its deep August swing low to 38,382, hitting new record highs twice in a week. Despite the topside closing in the green for three weeks, momentum is starting to wane and bidders may want to watch out for a transition period leading to a rapid decline that could gain momentum if it clears short-term stops.

Dow Jones Daily Chart

Frequently Asked Questions about Dow Jones

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is composed of the 30 most traded stocks in the United States. The index is price-weighted rather than capitalization-weighted. It is calculated by adding the prices of its 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 sufficiently representative, as it tracks only 30 conglomerates, unlike broader indices such as the S&P 500.

Many different factors drive the Dow Jones Industrial Average (DJIA). The overall performance of its component companies, as revealed in quarterly earnings reports, is the most important. U.S. and global macroeconomic data also contribute, as they influence investor sentiment. The level of interest rates set by the Federal Reserve (Fed) also affects the DJIA, as it affects the cost of credit, which many companies rely heavily on. Therefore, inflation can be a major driver, as can other metrics that influence the Fed’s 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 criterion. The theory uses elements of peak and trough analysis. Dow’s theory assumes three trend phases: accumulation, when smart money starts buying or selling; public participation, when the general public joins in; and distribution, when the smart money leaves.

There are several ways to trade the DJIA. One is through the use of ETFs, which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 participating companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts allow traders to speculate on the future value of the index, while options offer the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds allow investors to buy a share of a diversified portfolio of DJIA stocks, thereby gaining exposure to the overall index.

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