Dow Jones futures retreat after reaching record highs
- Dow Jones futures lose some ground ahead of the US market open on Friday.
- US stock indices reached record highs on market optimism, driven by the Fed’s signal of two more cuts this year.
- Tech stocks powered Thursday’s rally, driven by Intel’s 23% surge after Nvidia announced a $5 billion chip co-development investment.
Dow Jones futures lose 0.13%, with trading around 46,450 during European hours on Friday, ahead of the opening of the United States (US) regular session. Moreover, the S&P 500 futures decline 0.16% to remain below 6,700, while Nasdaq 100 futures fall 0.11% to trade near 24,650.
US index futures edge lower after reaching record highs on Thursday, supported by the Federal Reserve’s (Fed) latest policy easing. Market optimism stemmed from the Fed’s signal of two additional rate cuts this year.
However, the Fed signaled no rush to lower borrowing costs quickly in the coming months. Fed Chair Jerome Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after holding them steady since December amid concerns over tariff-driven inflation.
On Thursday’s regular session, the Dow Jones advanced 0.27%, the S&P 500 rose 0.48% and the Nasdaq Composite added 0.94%. Tech stocks led the rally, with Intel surging over 23% after Nvidia unveiled a $5 billion investment to co-develop chips. Nvidia shares also advanced 3.5%.
On the economic front, US Weekly Initial Jobless Claims dropped to 231K for the week ending September 13, below expectations of 240K and down from the prior week’s 264K (revised from 263K). The decline from a four-year high eased some concerns over labor market weakness.
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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