Dow Jones Industrial Average grinds higher as equity melt-up continues
- The Dow Jones pushed closer to 43,000 as investors await a resolution to US-China trade tensions.
- Key US inflation data due this week, beginning with US CPI inflation figures on Wednesday.
- Inflation expectations have tempered recently, but market forecasters are still bracing for tariff impacts.
The Dow Jones Industrial Average (DJIA) rose on Monday, testing above 42,800 as ongoing trade talks between the Trump team and Chinese representatives are ongoing in London. Equity markets are ‘melting up’ as investors await signs that Trump and China’s Xi Jinping will find a workaround to accelerationist trade war rhetoric that has gripped markets in a sentiment tug of war ever since the Trump administration announced a widespread package of “reciprocal tariffs” in early April.
According to reporting, President Donald Trump gave his negotiation team in London permission to explore lifting trade restrictions on tech exports to China as a potential bargaining chip. Whether or not the move will have a material impact on trade talks with China remains to be seen. Trump’s newest tech export restrictions on China, intended to curb Chinese access to technology necessary for building AI modeling machines, were introduced after the two countries had already begun trade talks.
Inflation data looms large in the week ahead
May’s Consumer Price Index (CPI) inflation figures, due on Wednesday, will kick off a raft of price volatility measures being released this week. Near-term CPI inflation is expected to tick higher as whiplash tariff policies that were announced, canceled, reinstated, and changed at the beginning of the second quarter are expected to begin having an increasing impact on inflation data in the coming months. Core annualized CPI inflation is expected to tick up to 2.9% YoY from 2.8%, well above the upper band of the Federal Reserve’s (Fed) 2% annual target.
The New York Fed’s latest survey of consumer expectations showed that consumer inflation fears are beginning to temper: the latest survey data showed the median consumer expected 1-year inflation to land somewhere near 3.2%, versus the previous 3.63%. However, the University of Michigan’s (UoM) Consumer Inflation Expectations survey results, slated to be released this Friday, will serve as the key sentiment print this week.
Dow Jones price forecast
The Dow Jones Industrial Average (DJIA) continues to push into the top end of recent consolidation, inching toward a near-term technical ceiling at the 43,000 major price handle. Price action remains on the high side of the 200-day Exponential Moving Average (EMA) near 41,650. Bullish momentum could see a pause for breathing room as technical oscillators tilt into overbought territory.
Dow Jones daily chart
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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