Dow Jones futures stay firm ahead of Fed policy decision, tech giants results
- Dow Jones futures move little amid market caution ahead of the Fed interest rate decision.
- S&P 500 and Nasdaq 100 futures advance as Nvidia shares gain in pre-market trading.
- Traders await earnings reports from the “Magnificent Seven” tech giants, with Alphabet, Meta, and Microsoft due on Wednesday.
Dow Jones futures hold firm above 47,850 during European hours, with the S&P 500 futures and Nasdaq 100 futures gaining 0.27% and 0.48%, trading around 6,950 and 26,300, respectively, ahead of the opening of the United States (US) regular session on Wednesday.
US index futures show mixed performance as traders await the US Federal Reserve’s (Fed) policy decision due later in the North American session. The Fed is widely expected to lower interest rates by another quarter point, bringing the benchmark rate to 3.75-4.00%, at its October meeting.
Traders will be looking forward to any signals from Fed Chair Jerome Powell’s speech at the post-meeting conference regarding the pace of future easing. The October CNBC Fed Survey also indicates that the Fed could implement additional rate reductions over the next two meetings.
US stock futures also gained support from renewed enthusiasm over artificial intelligence, as Nvidia shares rose 2.79% in pre-market trading at the time of writing, extending gains after Tuesday’s record 4.98% surge after announcing partnerships with the US government, Oracle, Uber, and Eli Lilly, among others. President Trump also mentioned plans to discuss Nvidia’s Blackwell chips with Chinese President Xi Jinping.
Market sentiment gains after China’s state-owned COFCO purchased three soybean cargoes from the United States ahead of the upcoming meeting between Presidents Donald Trump and Xi Jinping in South Korea due on Thursday. President Trump also expressed optimism that the meeting with Chinese President Xi would result in a “great deal” for both nations.
In Tuesday’s regular US session, Wall Street hit new all-time highs, with the Dow Jones rising 0.34%, the S&P 500 gaining 0.23%, and the Nasdaq 100 advancing 0.8%. Traders now await earnings from the “Magnificent Seven” tech giants, including Alphabet, Meta, and Microsoft are set to report on Wednesday, followed by Apple and Amazon on Thursday.
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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