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- The Dow Jones rose to 41,200.00 after Federal Reserve officials agreed that it is time to cut interest rates.
- Stock markets immediately moved to guessing the number of rate cuts in 2024.
- Interest rate markets are expected to see 100 basis point cuts by the end of 2024.
The Dow Jones Industrial Average surged more than 400 points on Friday after the Federal Reserve signaled its approval of upcoming interest rate cuts. Several Fed policymakers appeared before the markets to signal a long-awaited shift in policy stance that markets have been pricing in since at least last December, when investors initially expected six large rate cuts of more than 200 basis points by the end of 2024.
Read more: Jerome Powell confirms timing, pace of rate cuts will depend on data
Fast forward to late August, and traders are now grappling with whether the Fed will cut rates by 25 or 50 basis points in September. According to the CME’s FedWatch tool, interest rate markets are pricing in a three-to-one chance of two rate cuts on September 18, with the rest of the Fed committed to one quarter-point cut. Bets on an inaugural 50 basis point rate cut spiked in September after the Fed announced a 25 or 50 basis point rate cut. Chairman Jerome PowellSpeaking at the Jackson Hole Economic Symposium on Friday, the Fed chairman frankly admitted that it is finally time for the U.S. central bank to start pushing benchmark interest rates lower.
Dow Jones News
It took a while, but the Dow Jones eventually crushed the broad-based bids, pulling all but two of the index’s constituent stocks into the green on Friday. Procter & Gamble remained in the red, down about -0.6% and sliding below $170.00 a share after the disclosure that stock Shailesh Jejurikar, the company’s chief operating officer, sold more than 10,000 shares, or nearly a third of his stake in the company.
Read more Dow Jones news:
Intel shares fall 6% as uncertainty grows over German plant investment
Goldman Sachs advances on Powell’s Jackson Hole speech
Dow Jones Price Forecast
The Dow Jones Industrial Average has broken above 41,200.00 for the first time since late July amid a broad rally in stock markets. As the index continues to test higher levels, the Dow Jones Industrial Average is on track to challenge its all-time high of 41,371.38 set in mid-July.
Despite the strong bullish stance, buyers are at risk of running out of momentum as price action continues along the upside. The Dow Jones continues to trade well above the 200-day exponential moving average (EMA) at 38,187.93, and a near-term pullback would see the Dow Jones slide back to the 50-day EMA and rally to the key 40,000.00 price level.
Dow Jones Daily Chart
Dow Jones Frequently Asked Questions
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, consists of the 30 most actively traded stocks in the United States. The index is weighted by price rather than market capitalization. It is calculated by adding the prices of the component 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 tracks only 30 conglomerates, unlike broader indices such as the Standard & Poor’s 500.
There are many different factors that influence the Dow Jones Industrial Average. The overall performance of the companies that make up the index as reflected in their quarterly earnings reports is the main factor. U.S. and global macroeconomic data also contribute to investor sentiment. The level of interest rates, set by the Federal Reserve, also affects the Dow Jones Industrial Average because it affects the cost of credit, which many companies rely heavily on. Therefore, inflation can be a major driver in addition to other metrics that influence the Fed’s decisions.
Dow Theory is a method for determining the primary trend of the stock market developed by Charles Dow. One of the main steps is to compare the trend of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where they are both moving in the same direction. Volume is a confirmatory criterion. The theory uses elements of peak and trough analysis. Dow Theory assumes three phases of a trend: accumulation, when the smart money starts buying or selling; general participation, when the broader public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the Dow Jones Industrial Average. One is to use exchange-traded funds (ETFs) that allow investors to trade the Dow Jones Industrial Average as a single security, rather than having to buy shares in all the companies that make up the index. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). Dow Jones Industrial Average futures contracts allow 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 allow investors to buy a share of a diversified portfolio of Dow Jones Industrial Average stocks, thereby providing exposure to the overall index.
