Dow Jones futures struggle as US government shutdown continues
- Dow Jones futures decline as traders adopt caution amid ongoing US government shutdown.
- The White House backed Trump’s warning that job losses could occur as the government shutdown showed signs of continuing.
- Wall Street may draw support from AI-related deal activity.
Dow Jones futures edge down by 0.24% to trade below 46,850 during European hours on Tuesday, ahead of the regular session opening in the United States (US). The S&P 500 futures decline 0.13% to remain below 6,800, while Nasdaq 100 futures fall 0.11% to trade around 25,150.
US index futures lose ground as market sentiment weakens amid continuing United States (US) government shutdown. The White House supported the claim made by the US President Donald Trump’s on Monday that government employees were already being laid off due to the shutdown but cautioned that job losses could occur as the shutdown appeared likely to continue. Meanwhile, the Republican-led Senate rejected competing funding measures for federal agencies for the fifth time.
US stock markets may gain ground as traders expect the US Federal Reserve (Fed) to deliver further rate cuts by the end of the year. The CME FedWatch Tool suggests that markets are now pricing in a 94% chance of a Fed rate cut in October and an 84% possibility of another reduction in December.
Additionally, the US government shutdown has postponed the key economic data release, including September’s Nonfarm Payrolls report. The alternative jobs data like ADP Employment Change and Job Openings indicate a weakening labor market, which strengthens expectations of an imminent rate cut.
On Monday’s regular session, Wall Street started the week with a mixed performance, with the Dow Jones fell 0.14%, while the S&P 500 and Nasdaq Composite rose 0.36% and 0.71%, respectively, to record fresh highs. Gains were fueled by AI-related deal activity, as AMD surged 23.7% following the announcement of a multiyear agreement to supply AI chips to OpenAI, which may acquire up to a 10% stake in the company.
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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