Dow Jones futures move little despite risk-on mood, big tech results eyed
- Dow Jones futures may gain amid improved market sentiment.
- Wall Street’s recorded highs on Monday on optimism over the US-China trade deal and Fed rate cut bets.
- Amazon will begin layoffs on Tuesday, marking the largest round of job cuts in the company’s history.
Dow Jones futures remain steady around 47,700 during European hours, with the S&P 500 futures and Nasdaq 100 futures hovering around 6,900 and 25,950, respectively, ahead of the opening of the United States (US) regular session on Tuesday.
US index futures show little movement despite Wall Street’s rally to new record highs in the previous session as market sentiment improved on potential United States (US)-China trade deal and Federal Reserve (Fed) rate cut bets this week.
On Monday’s regular US session, the Dow Jones rose 0.71%, while the S&P 500 and Nasdaq 100 advanced 1.23% and 1.83%, respectively. Amazon said it will begin layoffs on Tuesday, marking the largest job cuts in the company’s history, CNBC cited a person familiar with the matter. Traders also await Big Tech earnings reports this week, including Apple, Amazon, Alphabet, Meta, and Microsoft.
Senior officials from the US and China announced over the weekend in Malaysia that they had reached a framework agreement on tariffs and other major issues, covering rare earth export controls, soybean purchases, and TikTok, setting the stage for Presidents Trump and Xi to finalize the deal during their meeting later this week in South Korea.
The Fed is widely expected to lower interest rates by another 25 basis points, bringing the benchmark rate to 3.75-4.00%, at its October meeting. The CME FedWatch Tool indicates that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 95% 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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