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    • Dow Jones rises after Fed agrees to rate cuts
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    Dow Jones rises after Fed agrees to rate cuts

    Vaseline Posted on

    • The Dow Jones rose to 41,200.00 after Fed officials decided it was time to cut rates.
    • Stock markets immediately started betting on the number of rate cuts in 2024.
    • Interest rate markets expect a 100 basis point rate cut by the end of 2024.

    The Dow Jones Industrial Average (DJIA) surged on Friday after the Federal Reserve (Fed) agreed to imminent rate cuts. Several Fed policymakers appeared before markets to signal a long-awaited shift in policy that markets have been waiting for since at least last December, when investors initially priced in six eye-watering rate cuts of more than 200 bps by the end of 2024.

    Read more: Jerome Powell reiterates that timing and pace of rate cuts will depend on data

    Fast-forward to late August, and traders are now grappling with whether the Fed will hike 25 or 50 bps in September. According to the CME’s FedWatch Tool, interest rate markets are pricing in roughly three-to-one odds for a double cut on Sept. 18, while the rest of the rate board is still holding out for a single quarter-point cut. Bets on a 50 bps opening cut in September rose after Fed Chair Jerome Powell, speaking at the Jackson Hole Economic Symposium on Friday, openly admitted that it’s finally time for the U.S. central bank to cut benchmark rates.

    Dow Jones News

    Despite a broad topside pivot in market sentiment on Friday, about a third of the Dow Jones Industrial Average is still struggling on the low side. Procter & Gamble Co. (PG) fell about 1 percent to $168.41 per share after it was reported that COO Shailesh Jejurikar sold nearly a third of his stake in the company. On the bullish side of the board, Dow Inc. (DOW) rose 2 percent to $53.62.

    Dow Jones Price Prediction

    The Dow Jones hit 41,200.00 for the first time since late July amid a broad rally in stocks. As the index continues to explore higher ground, the DJIA is on track to once again challenge the all-time highs of 41,371.38 set in mid-July.

    Despite a solid bullish stance, bidders risk running out of momentum with price action that is too high. The Dow Jones continues to trade well above its 200-day exponential moving average (EMA) at 38,187.93, and a short-term pullback would see the Dow Jones slide back to the 50-day EMA and rally to the 40,000.00 key price.

    Read more Dow Jones news: Intel drops 6% as German factory investment grows more uncertain

    Dow Jones Daily Chart

    Frequently Asked Questions about Dow Jones

    The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is composed of the 30 most traded stocks in the United States. The index is price-weighted rather than capitalization-weighted. It is calculated by adding the prices of its 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 sufficiently representative, as it tracks only 30 conglomerates, unlike broader indices such as the S&P 500.

    Many different factors drive the Dow Jones Industrial Average (DJIA). The overall performance of its component companies, as revealed in quarterly earnings reports, is the most important. U.S. and global macroeconomic data also contribute, as they influence investor sentiment. The level of interest rates set by the Federal Reserve (Fed) also affects the DJIA, as it affects the cost of credit, which many companies rely heavily on. Therefore, inflation can be a major driver, as can other metrics that influence the Fed’s 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 criterion. The theory uses elements of peak and trough analysis. Dow’s theory assumes three trend phases: accumulation, when smart money starts buying or selling; public participation, when the general public joins in; and distribution, when the smart money leaves.

    There are several ways to trade the DJIA. One is through the use of ETFs, which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 participating companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts allow traders to speculate on the future value of the index, while options offer the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds allow investors to buy a share of a diversified portfolio of DJIA stocks, thereby gaining exposure to the overall index.

    Vaseline
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