Dow Jones futures rise as tech stocks lead gains on AI momentum
- Dow Jones futures climb as AI-driven gains outweigh worries about the US government shutdown.
- US stock markets received support from the increased likelihood of further Fed rate cuts.
- Market optimism grows on OpenAI’s $6.6B sale, $500B valuation, and partnership with South Korean chipmakers.
Dow Jones futures edge up by 0.20% to reach 46,900 during European hours on Friday, ahead of the regular session opening in the United States (US). However, the S&P 500 futures rise 0.25% to trade above 6,750, while Nasdaq 100 futures gain 0.30% to trade near 25,200.
US index futures gain ground after Wall Street posted fresh highs during overnight trading. The AI-driven rally overshadows concerns about the ongoing US government shutdown. However, traders may adopt caution as the government shutdown is likely to delay the release of key US macro including the US September Nonfarm Payrolls (NFP) report. The US ISM Services PMI and the final S&P Global Services PMI reports are due later on Friday.
On Thursday’s regular session, the Dow Jones added 0.06%, the S&P 500 rose 0.17%, and the Nasdaq Composite advanced 0.39%. Stocks from the tech sector led gains on AI momentum, with Nvidia rising 0.9%, AMD advancing 3.5%, and Intel jumping 3.8%. Market sentiment was further boosted by OpenAI’s $6.6 billion share sale, valuing the firm at $500 billion, along with news of a landmark partnership with South Korean tech conglomerates Samsung and SK.
US stock markets received support as recent weaker data US labor market boosted bets on further Federal Reserve (Fed) rate cuts. The CME FedWatch Tool suggests that markets are now pricing in a 97% chance of a Fed rate cut in October and a 91% 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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