Dow Jones futures steady ahead of US ISM Manufacturing PMI
- Dow Jones futures move little as investors evaluate the implications of the US military operation in Venezuela.
- The US detained Venezuelan President Maduro to face charges without congressional approval.
- Traders await the US ISM Manufacturing PMI data scheduled for release later on Monday.
Dow Jones futures inch higher 0.06% to trade near 48,650 during the European session on Monday, while S&P 500 and Nasdaq 100 futures also gained, edging higher 0.14% and 0.38% to near 6,910 and 25,480, respectively. Attention is on the US ISM Manufacturing PMI data due later in the North American session.
US index futures rise as investors assess the implications of the United States (US) military operation in Venezuela. The administration of US President Donald Trump launched a “large-scale strike against Venezuela” and detained President Maduro to face charges, without congressional approval. Trump said the US would administer Venezuela until a safe, orderly, and judicious transition is achieved, CNN reported over the weekend.
However, Secretary of State Marco Rubio struck a more measured tone on Sunday, stressing that Washington has sufficient leverage to achieve its objectives while stopping short of implying direct US governance.
President Trump warned Washington could launch a new military intervention if Venezuela’s interim president, Delcy Rodríguez, fails to meet US demands. He also commented on Colombia’s leadership, floated the idea of “Operation Colombia,” criticized Mexico for failing to get its act together, and suggested Cuba appeared close to collapse, The Guardian reported on Monday.
Traders await further cues on the Federal Reserve (Fed) policy outlook. Federal Open Market Committee (FOMC) December Meeting Minutes suggested that most participants judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates.
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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