Dow Jones Industrial Average declines on Friday as fresh tariff threats emerge
- The Dow Jones fell on Friday, shedding 780 points at its lowest.
- Relief from tariff threats is over as the trade policy cycle begins anew.
- Markets pared back downside bets after investors remembered the odds of a tariff walkback remain high.
The Dow Jones Industrial Average (DJIA) saw stiff losses during the Friday market session The major equity index declined 780 points top-to-bottom and tapped 41,200 before a slow crawl back to the 41,750 region. United States (US) President Donald Trump sent markets into a backslide after announcing his intent, or at least desire, to impose import taxes on a specific company, the first time the President has targeted a single business entity for tariffs. Donald Trump followed up with a fresh threat of tariffs on European trading partners after his previous bout of walked-back tariff threats against Europe produced little in the way of results.
Trump came out of the gate swinging on Friday, declaring his belief that Apple (AAPL) products should be subject to a 25% tax, and also stating that trade talks with the European Union (EU) are “going nowhere”, and 'recommended' via social media proclamation that the US should impose an across-the-board tariff of 50% on all European goods to begin on June 1. The White House was quick to follow up on President Trump’s social media posting, stating that the President’s direct statements are not necessarily a declaration of official government intent or policy.
Tariff threats and trade ambiguity back on the menu
Policy uncertainty, rather than the tariff threats themselves, is likely the thorn in investors’ side on Friday. As noted by Paul Donovan, chief economist at UBS Global Wealth Management:
“Given the number of times Trump has retreated on these sort of threats, markets are likely to place only a limited amount of weight on this stance; but it is a reminder of the policy uncertainty that persists in the United States at the moment.”
Paul Donovan followed up by noting that the most recent tariff suspension by the Trump administration was only a 90-day temporary fix, and even the threat of a return to high import fees could jostle investor confidence once again. The US’s “reciprocal tariff package” that was announced on April 2 is set to come back into effect on July 1 unless trade deals with key countries are finalized before that date, a feat of diplomacy the Trump administration officials appear unable or unwilling to deliver.
Next week will be a shorter trading week with a US holiday on the cards for Monday. However, a scheduled speech from Federal Reserve (Fed) Chair Jerome Powell on Sunday could set the tone for the first half of the week’s docket before the meeting minutes from the last Fed rate call are released on Wednesday.
Read more stock news: Apple stock sinks after Trump threatens more tariffs
Dow Jones price forecast
Friday’s fresh bullish plunge has pushed the Dow Jones Industrial Average back into the 200-day Exponential Moving Average (EMA) as the post-tariff suspension recovery looks set to end. The Dow Jones is in the red for not only Friday, but also the week as well as the year, down around 2% from January’s opening bids.
Dow Jones daily chart
Dow Jones 5-minute 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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