Dow Jones futures steady despite US attacks on Iranian nuclear sites, PMI awaited
- Dow Jones futures remain stable after recovering intraday losses despite a risk-off mood.
- The United States attacked Iran's three nuclear facilities, including Fordow, Natanz, and Isfahan.
- US yields on Treasury bonds are trading higher amid safe-haven flows.
Dow Jones futures have pared earlier losses and are now flat around 42,500, while E-mini S&P 500 futures trade higher near 6,030, up 11 points, after trimming gains during Monday’s European session. Futures on Wall Street remain in the positive territory despite dampened risk sentiment after the United States (US) attacked three Iranian nuclear facilities. Traders await the S&P Global US Purchasing Managers Index (PMI) data for June, scheduled later in the day.
US President Donald Trump said late Saturday that he had "obliterated" Iran's three nuclear facilities, including Fordow, Natanz, and Isfahan, in strikes overnight, in coordination with an Israeli assault. Iranian parliament approved a measure to close the Strait of Hormuz. Iran has threatened to close the strait in the past but has never followed through on the move, per Reuters.
Traders are cautiously positioning ahead of Monday’s US session, with yields trading higher amid safe-haven flows. The 2-year and 10-year yields on US Treasury bonds stand at 3.92% and 4.39%, respectively, at the time of writing.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is trading at around 99.600 at the time of writing. On Friday, Federal Reserve (Fed) Governor Christopher Waller noted that the US central bank may initiate easing monetary policy tightening as soon as next month, signaling flexibility amid global economic uncertainty and rising geopolitical risks.
Last week, the Federal Reserve (Fed) kept the interest rate steady at 4.5% in June as widely expected. The Federal Open Market Committee (FOMC) still expects around 50 basis points of interest rate cuts through the end of this year. However, Fed Chair Jerome Powell warned that ongoing policy uncertainty will keep the Fed in a rate-hold stance, and any rate cuts will be contingent on further improvement in labor and inflation data.
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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