Dow Jones futures steady as traders await US Nonfarm Payrolls
- US stock futures trade mixed ahead of August Nonfarm Payrolls, expected to show 56,000 jobs added and 4.1% unemployment.
- Thursday's regular session closed higher, with the Dow Jones jumping 1.18% for a second straight day of gains.
- Rally driven by falling Treasury yields following dovish rate comments from Fed Governor Christopher Waller.
Dow Jones futures inch lower by 0.06% to trade near 53,710 during European hours on Friday. Meanwhile, S&P 500 futures advance by 0.06% to trade near 7,760, while Nasdaq 100 futures rise by 0.38% to trade around 29,640.
US stock futures are trading mixed as investors await the upcoming August Nonfarm Payrolls (NFP) report for clues on the Federal Reserve's (Fed) monetary policy path. Markets broadly expect the economy to add 56,000 jobs, with the unemployment rate holding steady at 4.1%.
This cautious pre-market tone follows a strong regular session on Thursday, where the Dow Jones rose 1.18%, the S&P 500 gained 1.06%, and the Nasdaq Composite surged 1.4%, marking a second straight day of gains for all three major indices.
Broad market sentiment was boosted by a pullback in Treasury yields after Fed Governor Christopher Waller signaled a preference to keep interest rates unchanged at the September meeting, noting that additional rate hikes would not be necessary if underlying inflation continues to cool without major surprises.
US stocks gain as dovish Fed tone outweighs muted bond move
Analysts at Deutsche Bank highlight that the latest Fed commentary had a far more pronounced impact on equities than on rates, noting that “the benefits were much more visible for equities, with the S&P 500 (+1.06%) having its best day in almost a month, than for US long-end bonds, with 10yr Treasury yields a modest -1.1bps lower on the day.” According to the bank, “for US equities, the combination of strong data and dovish commentary offered more decisive support,” helping to underpin the latest leg higher in the S&P 500 even as the move in Treasuries remained comparatively restrained.
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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