Dow Jones futures rise after US ends government shutdown
- Dow Jones futures add gains as market sentiment improves after the US government impasse ended.
- President Trump signed the funding to end the longest government shutdown in US history.
- Traders may adopt caution as hawkish Fedspeak diminished Fed rate cut bets for December.
Dow Jones futures added 0.24% to trade above 48,450 during European hours ahead of the opening of the United States (US) regular session on Thursday. Moreover, the S&P 500 futures and Nasdaq 100 gained by 0.23% and 0.36%, with trading near 6,900 and 25,700, respectively.
US index futures rise amid improving market sentiment, driven by the end of the United States (US) government shutdown. US President Donald Trump signed the funding bill on Thursday, ending the record 43-day government shutdown in US history. The bill requires the Government to resume normal operations and call for direct payment for individuals to purchase healthcare.
Traders may adopt caution due to uncertainty surrounding the US economic outlook and Federal Reserve (Fed) policy outlook. Weaker-than-expected private labor data for October strengthened expectations of potential Fed policy easing. However, the likelihood of the Federal Reserve (Fed) rate cut in December faded following recent hawkish Fedspeak. The CME FedWatch Tool shows markets pricing in nearly a 60% chance of a 25-basis-point Fed rate cut in December, down from 67% a day ago.
Atlanta Fed President Raphael Bostic addressed economic trends at the Atlanta Economic Club on Wednesday. Bostic cautioned that easing policy too soon could “feed the inflation beast,” while noting that a sharp downturn in the labor market is unlikely in the near term. Meanwhile, Boston Fed President Susan Collins said that “Elevated inflation warrants still mildly restrictive policy,” adding that she has not seen “an increase in downside employment risks since the Summer.”
On Wednesday’s US session, Wall Street posted mixed results, with the Dow Jones rising 0.68% to reach new record highs, while the S&P 500 inched up 0.06% and the Nasdaq 100 declined 0.26%. Health care stocks led the gains, supported by strong performances from Eli Lilly, up 3% and AbbVie, up 3.6%, as solid earnings bolstered sector momentum. Financials also advanced, with Goldman Sachs up 3.5%, JPMorgan 1.5%, and American Express 0.7%. Technology and AI-related stocks weakened, with Tesla down 2.1%, Meta down 2.9%, and Palantir down 3.6%.
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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