Dow Jones futures show little movement following weakness in AI majors, profit-taking
- Dow Jones futures remain steady amid market caution following weakness in AI leaders and profit-taking.
- US index futures were little changed as traders remained cautious amid mixed signals from Fed officials.
- Nvidia, Oracle, and Micron Technology led losses on concerns over elevated valuations and risky sector interdependencies.
Dow Jones futures hover around 46,450 during European hours on Thursday, ahead of the United States (US) session opening. Meanwhile, the S&P 500 futures remain steady near 6,700, while Nasdaq 100 futures remain close to 24,750.
US index futures move little after Wall Street fell for two consecutive sessions, following weakness in AI leaders and profit-taking near record highs. Additionally, traders adopt caution due to mixed signals from US Federal Reserve (Fed) officials. Investors now await Thursday’s weekly US Initial Jobless Claims for Fed rate outlook cues, while speeches from Fed officials Schmid, Williams, Barr, and Logan will also be closely watched.
Fed Chair Jerome Powell struck a cautious note, stressing that the US central bank must weigh stubborn inflation against a softening job market, calling it “a challenging situation” and reiterating comments from last week. However, the CME FedWatch tool suggests that money markets are currently pricing in nearly a 92% possibility of a Fed rate cut in October, up from 87% a week earlier.
San Francisco Fed President Mary Daly said on Wednesday that further rate reductions are likely to be needed, as the central bank works to restore price stability and provide necessary support to the labor market. Chicago Fed President Austan Goolsbee broke away from the overarching narrative of consecutive Fed rate cuts heading through the end of the year.
On Wednesday’s regular US session, the Dow Jones declined 0.37%, the S&P 500 slipped 0.28% and the Nasdaq Composite fell 0.33%, with all three benchmarks extending their pullback from all-time peaks. AI giants, including Nvidia, Oracle, and Micron Technology, led declines amid concerns over high valuations and risky sector interdependencies after recent deals.
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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