Dow Jones jumps 900 points on Tesla optimism, but Powell tensions keep market fragile

Source Fxstreet
  • Wall Street rebounds sharply; S&P 500 and Nasdaq gain 2.1% and 2.4% ahead of Tesla earnings release.
  • Trump signals Fed to blame for any slowdown, as WSJ notes plan to scapegoat Powell over trade-driven weakness.
  • Gold hits record $3,500 on safe-haven demand; DXY bounces to 98.56 after plunging to a three-year low at 97.92.

The Dow Jones Industrial Average (DJIA) recovered on Tuesday, gaining over 900 points or 2.49% above the 39,000 figure as investors await Tesla’s (TSLA) earnings report late in the day. Despite this, the market mood remains fragile amid fears that the White House continues its harsh rhetoric regarding Federal Reserve (Fed) Chair Jerome Powell.

DJIA rises 2% above 39,000, while investors weigh earnings optimism against Fed independence fears and trade uncertainty

Sentiment has improved, as depicted by the other two leading United States (US) equity indices, which are also rising. The S&P 500 and the Nasdaq Composite gained 2.1% and 2.4%, respectively. Trump’s comments had suggested that if the economy slows, it will be due to the Fed not cutting interest rates.

Wall Street Journal (WSJ) Nick Timiraos, a Fed watcher, wrote, “President Trump is signaling that he will blame the Federal Reserve for any economic weakness that results from his trade war if the central bank doesn’t cut interest rates soon.”

Uncertainty about US trade policies and Washington’s threat to Fed independence drove investors to seek safety in haven assets. Gold reached a record high at $3,500, while appetite for the greenback has taken a hit, as the US Dollar hit a three-year low below the 98.00 handle on Monday.

The US Dollar Index (DXY), which tracks the dollar’s performance against a basket of six currencies, has recovered some ground. It is up at 98.56, up 0.25% after reaching a low of 97.92.

As of this writing, US Treasury Secretary Scott Bessent sees a de-escalation with China and an unsustainable situation, as revealed by Bloomberg.

Meanwhile, recent data suggested that traders are pricing in 91 basis points of Fed rate cuts toward the end of 2025.

Dow Jones price forecast

The DJIA downtrend remains in place, but traders have bought the dip and pushed the index past 39,200 on Bessent’s comments. If buyers want to see 40,000, they must clear 39,500 first.

Conversely, bears need to drag the index below 39,000 for a bearish continuation, which would open the door for lower prices. The next support would be 38,500, followed by 38,000, ahead of testing the year-to-date (YTD) low of 36,614, which was hit on April 7.

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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