Dow Jones futures rise due to easing US-China trade tensions, Fed rate cut bets
- Dow Jones futures gain as Trump noted that tariffs on China may be lowered, but China has to do things too.
- Traders eye earnings from Netflix, Coca-Cola, Tesla, IBM, and Intel amid the government data blackout.
- US stocks receive support from the increased likelihood of two more Fed rate cuts by year-end.
Dow Jones futures advance 0.37% to rise near 46,550 during European hours, ahead of the opening of the United States (US) regular session on Monday. The S&P 500 futures rise 0.45% to trade around 6,730, while Nasdaq 100 futures gain 0.56% to break above 25,100 at the time of writing.
US index futures gain ground amid easing United States (US)-China trade tensions. US President Donald Trump noted that he wants China to buy soybeans at least in the amount they were buying before. Trump added that he believes China will make a deal on soybeans. “We can lower what China has to pay in tariffs, but China has to do things for us too,” he added.
Last week, the Dow Jones slipped 0.65%, the S&P 500 dropped 0.63%, and the Nasdaq 100 declined 0.36%, weighed down by renewed trade concerns, stress in regional banks, and profit-taking in AI-related stocks. Traders now turn their focus on quarterly results from Netflix, Coca-Cola, Tesla, IBM, and Intel, as the ongoing data blackout from the government shutdown pushes markets for fresh market cues.
US stocks also draw support from the increased likelihood of further rate cuts by the US Federal Reserve (Fed). The CME FedWatch Tool indicates that markets are now pricing in nearly a 100% chance of a Fed rate cut in October and a 96% possibility of another reduction in December.
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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