Dow Jones Industrial Average continues to grind higher during midweek headline lull

Source Fxstreet
  • The Dow Jones gained another 100 points on Wednesday.
  • Equities are enjoying a brief reprieve from major political headlines.
  • The economic data docket remains thin until Friday’s PMI print.

The Dow Jones Industrial Average (DJIA) continues to lean into the bullish on Wednesday, climbing around 100 points and inching towards 44,200 as equities tilt into the buy button. There aren’t any particular reasons for a fresh bull run to kick off, but investors aren’t finding any particular reason for a turn into the bearish side, either.

After a campaign trail full of almost-daily threats of wide-sweeping tariffs on all of the US’ trading partners, President Donald Trump’s big plans for day-one tariffs have evaporated into the ether. Fresh threats of an ambiguous level of import tariffs on goods from Canada, Mexico, and China have appeared on Trump’s social media. Still, investors have functionally called the new President’s bluff on his standard trade war rhetoric.

Economic data releases remain thin through the midweek market sessions, and equities are drifting higher in the absence of any numbers to be concerned about. S&P Global Purchasing Managers Index (PMI) business activity survey results are due on Friday. PMI components are expected to come in mixed, with January’s PMI for the manufacturing sector expected to tick upwards slightly and a soft decline forecast for the services component. The figures themselves retain a cautionary level of exposure, and overall market impact should be at least somewhat moderated by the fact that surveys historically have a low response rate and may not accurately represent the overall business economy.

The Federal Reserve (Fed) has entered its latest blackout period ahead of next week’s interest rate call, giving traders some breathing room from the usual parade of central bank policymaker appearances. The Fed is widely expected to stand pat on interest rates for most of the first half of 2025, a hardly surprising outcome as everyone waits to see which parts of the economic machine President Donald Trump chooses to break as retribution for any insults, real or perceived.

Dow Jones news

The Dow Jones is overall mixed on Wednesday, with the equity board roughly split down the middle between winners and losers. Outsized gains in key tech favorites are helping to keep the DJIA tilted toward the bullish side.

Nvidia (NVDA) gained another 4% during the midweek market session, climbing toward $147 per share. Nvidia is benefiting from an anticipated windfall of government funding in the tech space after President Donald Trump announced an investment plan into US-based “AI infrastructure” involving pledges from tech space giants OpenAI, Oracle, and Softbank to invest half a trillion dollars in the proposal, dubbed Stargate. Critics will be quick to point out the Stargate project looks eerily like taxpayers being put on the hook for tech space improvements with ambiguous potential for returns, but the move will undoubtedly be a boon for companies providing the tech that AI relies on to function.

Dow Jones price forecast

The Dow Jones has gained ground for all but one of the last seven straight trading sessions, and further gains are on the cards as price action grinds its way back above the 44,000 handle. Technical oscillators have pushed back into the high end as the Dow Jones recovers from its last swing low below 42,000, but plenty of room appears left to run as the Moving Average Convergence-Divergence signal lines continue to rotate higher.

Dow Jones daily 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.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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