Dow Jones Industrial Average flattens after cautionary ADP jobs print
- The Dow Jones remains hobbled near 42,550 on Wednesday.
- Investor sentiment is hamstrung after jobs preview data came in weaker than expected.
- This Friday’s upcoming NFP jobs print will take on additional importance.
The Dow Jones Industrial Average (DJIA) remained largely unchanged on Wednesday after bullish investor sentiment was stymied by a softer-than-expected ADP jobs print. Overall market momentum is cooling off as indexes hit a lull between trade war headlines.
ADP Employment Change numbers softened sharply in May, showing a net addition of just 37K jobs, well below the expected 115K upswing. ADP jobs figures are historically volatile, and have served as a poor forecast of Nonfarm Payrolls (NFP) data that follows shortly after. Regardless, this Friday’s upcoming NFP print will take on newfound significance as investors grow increasingly apprehensive about the state of the American economy’s labor sector. Businesses have been growing increasingly apprehensive about business conditions in the face of constantly changing trade policies pouring out of the White House, leading many operators to pull back on hiring and investment plans.
Jobs data uncorks bullish momentum, sentiment surveys do little to help
ISM Services Purchasing Managers' Index (PMI) survey results further dampened investor sentiment on Wednesday, showing that business operators in the services sector are growing gloomier about growth expectations. Aggregated survey results fell to a contractionary 49.9, falling to an 11-month low.
Wednesday was the deadline that the Trump administration had set for trading partners to deliver their best trade deal offers to the White House. Countries were expected to offer up their best trade offer to negotiate their way out of the reimposition of President Trump’s “reciprocal” tariffs package that was announced in April, then suspended for 90 days at the last minute. The administration has remained fairly mum on trade deals on Wednesday, suggesting that the inbox may not be stuffed as full as Trump officials had proposed earlier in the week.
Trump’s self-styled “Liberation Day” tariffs are set to take effect again in early July. However, investors are still banking on a return to form and that the White House will find a reason to again delay tariffs as the clock winds down.
Dow Jones price forecast
The Dow Jones Industrial Average is muddling through a consolidation phase just north of the 200-day Exponential Moving Average (EMA). Price action remains stuck in a near-term range between 42,000 and 43,000. Momentum is still tilted toward the upside, but a lack of progress coupled with technical oscillators testing into overbought territory could signal a technical pullback below long-run moving averages.
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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