Dow Jones futures surge over potential for Fed rate cut, await US ISM PMI data
- Dow Jones futures appreciate due to the rising likelihood that the Fed will deliver an interest rate cut in September.
- Traders monitor Trump's actions regarding the nomination of a replacement for Fed Governor Adriana Kugler.
- Palantir climbed over 4%, while Hims & Hers Health plunged roughly 13% in extended trading.
Dow Jones futures appreciate ahead of the US market opening on Tuesday, trading around 44,380, up by 0.17%, during early European hours. Meanwhile, S&P 500 futures surge by 0.25% to 6,370, and Nasdaq 100 futures advance 0.33% to trade above 23,300. US ISM PMI data will be eyed later in the North American session.
US stock index futures appreciate due to the rising likelihood that the US Federal Reserve (Fed) will deliver an interest rate cut in September, following weaker labor market data that has heightened concerns over the US economic outlook. According to CME’s FedWatch Tool, markets are pricing in a 91.6% chance of a 25 basis point rate cut by the Fed next month.
However, traders are expected to closely monitor US President Donald Trump as he moves to nominate a replacement for Fed Governor Adriana Kugler, who unexpectedly resigned on Monday. The new appointee may be more aligned with Trump's push for lower interest rates.
In future markets, Palantir jumped more than 4% after the AI software company surpassed second-quarter earnings expectations and raised its outlook, driven by strong demand for its AI platform. However, Hims & Hers Health tumbled around 13% after falling short of revenue estimates for the second quarter. Investors now await earnings reports on Tuesday from key names such as AMD, Pfizer, Snap, Rivian, and Yum! Brands.
On Monday’s regular market, Wall Street rebounded from last week’s pullback, with the Dow climbing 1.34%, the S&P 500 gaining 1.47%, and the Nasdaq Composite surging 1.95% as traders digested the latest round of corporate earnings.
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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