Dow futures drops as US trade uncertainty hurts risk appetite
- Dow futures trade cautiously as investors’ risk-appetite has diminished ahead of tariff deadline.
- The White House is expected to announce trade deals with a number of trading partners soon.
- US Bessent warns that those nations will face reciprocal tariffs, which fails to strike a deal.
Dow Futures face a slight selling pressure ahead of opening on Monday after a holiday-stretched weekend. Unites States (US) equities trade lower in a risk-off market sentiment amid uncertainty surrounding the global trade in the countdown to the expire of 90-day tariff pause on July 9.
At the time of writing, S&P 500 futures are down 0.3% to near 6,260. Down futures ease 35 points points, and ticks down to near 44,800.
Investors rush to safe-haven assets, such as the US Dollar (USD), as investors doubt the success of US President Donald Trump’s 90-day reciprocal period, which aimed to strike bilateral trade deals without impacting the ongoing trade flow.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, revisits the weekly high around 97.45.
So far, Washington has closed bilateral deals with the United Kingdom (UK) and Vietnam, a limited pact with China, significantly lower than what it promised after sweeping reciprocal tariffs. The White House expressed confidence after announcing tariff pause that it will aim to close “90 deals in 90 days”.
Meanwhile, US Treasury Secretary Scott Bessent has expressed optimism that Washington will sign a number of trade deals soon. “There’s a lot of foot dragging on the other side, and so I would expect to see several big announcements over the next couple of days,” Bessent said in an interview with CNN during the weekend.
Bessent has warned that the US will send letters to those nations, specifying tariff rates, which failed to strike a deal during the 90-day tariff pause period. “President Trump’s going to be sending letters to some of our trading partners, saying that, if you don’t move things along, then, on Aug. 1, you will boomerang back to your April 2 tariff level.
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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