- The Dow Jones is settling back into the 44,000 handle as investors take a pause.
- US PPI inflation accelerated faster than expected in November.
- Analysts increasingly worry that it may take longer to get to 2% inflation.
The Dow Jones Industrial Average (DJIA) held steady on Thursday, drifting into the 44,000 major price handle as investors balked at the latest US Producer Price Index (PPI) inflation figures. This week’s overall US inflation data package has given traders cause for pause, but not enough to fundamentally shift expectations for December’s Federal Reserve (Fed) rate cut.
US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY.
Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.
Dow Jones news
The Dow Jones was roughly on-balance during Thursday’s US market session, with winners equally mixed. Coca-cola (KO) found some room to move higher, climbing 1.45% to land somewhere near $63.50 per share after Deutsche Bank upgraded its stance to bullish on the soft drink manufacturer. Unitedhealth Group (UNH) continued to backslide, falling over 1.75% and approaching $524 per share after video surfaced of the company’s current CEO defending the healthcare company’s claim denial practices, which was filmed the day after Brian Thompson’s assassination. Brian Thompson was the CEO of Unitedhealth’s insurance subsidiary responsible for one of the highest claims denial rates in the US.
Elsewhere in equities, Boeing shares climbed again after the airline manufacturer officially resumed production of its 737 Max project.
Dow Jones price forecast
The Dow Jones continues to grind lower in the runup to the December market slowdown. Price action has turned tepid, sending bids drifting back toward the 50-day Exponential Moving Average (EMA) near 43,480. With a lack of key bullish momentum, the DJIA is poised to close slightly lower for a sixth consecutive trading day.
Despite bulls appearing to run out of gas in the near term, the long-term trend remains decidedly bullish. The major equity index may be down 2% in December, but that takes only a small bite out of November’s stellar 7.6% return, and the Dow Jones remains up nearly 17% YTD in 2024.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the 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 broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed 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 criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable 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 enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
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