Dow Jones futures edge up ahead of FOMC Meeting Minutes
- US index futures gain ahead of the FOMC Minutes for September’s meeting.
- US index futures receive support from the increased likelihood of further Fed rate cuts.
- Oracle slipped 2.5% after ‘The Information’ reported that its cloud business margins came in weaker than expected.
Dow Jones futures added 0.12% to trade above 46,900 during European hours on Wednesday, ahead of the regular session opening in the United States (US). The S&P 500 futures rise 0.17% to trade above 6,750, while Nasdaq 100 futures gain 0.21% to remain around 25,100.
US index futures edge up ahead of the Federal Open Market Committee (FOMC) Minutes for September’s meeting. Investors’ sentiment may improve amid a rising dovish tone surrounding the US Federal Reserve (Fed) policy outlook. The CME FedWatch Tool suggests that markets are now pricing in nearly a 95% chance of a Fed rate cut in October and an 83% possibility of another reduction in December.
On Tuesday’s regular session, Wall Street slid as renewed worries emerged over the sustainability of the artificial intelligence rally and the ongoing government shutdown. The Dow Jones fell 0.2%, the S&P 500 lost 0.38%, and the Nasdaq 100 fell 0.67%.
Oracle fell 2.5% after ‘The Information’ reported margins from the cloud business are weaker than forecasts. Also, the enterprise software company is losing money on some of its deals to rent out Nvidia’s chips. Mounting fears of a potential reversal in the AI rally, reminiscent of the late-1990s dot-com bubble, further weighed on stocks.
The market sentiment weakens amid the ongoing government shutdown, with President Donald Trump threatening mass federal worker layoffs as prospects for a resolution dim. However, Democrats insist it will not sway them in the increasingly bitter shutdown standoff.
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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