Dow Jones Industrial Average sinks amid renewed tariff threats
- The Dow Jones tumbled around 300 points on Friday.
- According to the White House, reports of a delay in tariffs is false.
- US PCE inflation met expectations, and trade tariffs are inbound this weekend.
The Dow Jones Industrial Average (DJIA) broke to the bearish side toward the tail end of the US trading session on Friday. Equities backslid after a spokesperson for US President Donald Trump reaffirmed that trade tariffs against Canada, Mexico, and China will be implemented this Saturday.
Pre-market reports suggested that President Trump’s team would be kicking the tariff can down the road, and the White House would be instituting exemption policies that US trade partners would be able to use to soften the blow of tariffs on key industries. The reports were enough to keep investor sentiment buoyed, with analysts from JPMorgan pivoting to expect a “base case” of no tariffs at all. However, White House Press Secretary Karoline Leavitt crushed those hopes, reiterating that import tariffs of 25% on Canada and Mexico and a 10% tariff on all Chinese goods would be implemented beginning February 1.
White House: Earlier reports are wrong, tariffs are coming February 1
Further cold water was splashed on investor sentiment after Press Secretary Leavitt confirmed that, while President Trump is ‘exploring’ an exemption mechanism and an exemption specifically for the Canadian Crude Oil industry, nothing is currently on the books. The US economy heavily relies on Canadian Crude Oil imports, with most US refineries geared to process heavy Crude Oil products from Canada and Mexico, not the light sweet crude oil products produced by US pumpjacks.
US Personal Consumption Expenditures Price Index (PCEPI) inflation came in exactly as expected on Friday, showing that key core inflation metrics are holding stubbornly higher than the Federal Reserve’s (Fed) 2% annual target, making it difficult for the US central bank to deliver rate cuts in a timely manner. US PCE inflation held steady at 2.8% YoY in December.
Dow Jones news
Almost the entire Dow Jones equity board fell into the red on Friday, with a few tech giants managing to hold onto thin gains for the day. Amazon (AMZN) held 1.6% above Friday’s opening bids near $240 per share, followed by Cisco Systems (CSCO), which gained 0.4% on the day to cross $60 per share.
Chevron (CVX) fell to the bottom of the Dow Jones, sinking 4.5% and falling below $150 per share. US energy companies are largely exposed to possible trade tariffs that may include Canadian Crude Oil sources. Chevron also reported a miss in its earnings per share in its pre-market earnings update, citing lower margins on refined products.
Dow Jones price action
The Dow Jones’ bearish price action on Friday sent bids back below 44,800, crimping chances for a bullish recapture of record highs above 45,000. The major equity index is now testing back into the 44,600 region, and the DJIA’s recent bull run appears to be evaporating.
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.
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