Dow Jones futures move little ahead of US PPI inflation
- Dow Jones futures remain steady as traders adopt caution ahead of the US Producer Price Index data.
- US PPI is forecast to increase 0.3% MoM, with Core PPI likewise projected to climb 0.3% in August.
- US equities advanced in Tuesday’s session, as traders grew increasingly confident that the Fed would cut rates in September.
Dow Jones futures are steady, edging down 0.04% to trade around 45,700 during European hours on Wednesday, ahead of the United States (US) market open. However, the S&P 500 futures advance 0.20% to trade near 6,550, while Nasdaq 100 futures climb 0.28% to trade near 23,950.
US stock futures show mixed performance as traders adopt caution ahead of the August US Producer Price Index (PPI) data that could shape the Federal Reserve’s (Fed) policy outlook. US PPI is expected to rise 0.3% month-on-month, a sharp slowdown from the 0.9% gain in July. Core PPI is also projected to advance 0.3%, following a 0.9% surge prior. The annual headline producer inflation is forecast to hold steady at 3.3%, while Core producer inflation is expected to ease slightly to 3.5% from the previous 3.7% reading.
US stock markets gained ground on Tuesday’s regular session, as traders firmly expect a rate cut by the US Federal Reserve (Fed) in September, driven by the disappointing revised US job growth figures. The Dow Jones rose 0.43% and the S&P 500 advanced 0.27%, while the Nasdaq Composite added 0.37% to mark fresh record highs.
Oracle shares jumped 26% in Tuesday’s after-hours trading, following a report that multicloud database revenue from Amazon, Google, and Microsoft soared 1,529% last quarter, driven by surging demand for AI servers. The rally also lifted other AI-related stocks, with Nvidia gaining 1.46%, per CNBC.
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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