Dow Jones Industrial Average continues to climb during low-impact Thursday
- The Dow Jones climbed another 350 points on Thursday, gaining 0.8%.
- Markets are dealing with a lack of meaningful data by hitting the buy button.
- US PMI figures loom ahead on Friday, but Trump headlines dominate.
The Dow Jones Industrial Average (DJIA) continued its steady drift into the high end on Thursday, gaining 0.8% and adding around 350 points to the tally as investors broadly tilt into a risk on stance. United States (US) President Donald Trump took the opportunity to air some of his economic grievances during an appearance at the annual World Economic Forum (WEF) hosted in Davos, Switzerland. Investors brushed off the majority of the President’s structural incongruities, though his statements about demanding lower Crude Oil prices drew some attention from the commodity markets.
The economic data docket on Thursday was thin, giving investors little else to chew on except political headlines from the White House’s newest resident. The US S&P Global Purchasing Managers Index (PMI) figures are due on Friday, and they are expected to be mixed. However, PMI prints are unlikely to have any meaningful impact unless the final figures deviate wildly from market expectations.
President Donald Trump lashed out about a wide variety of topics during his appearance at the WEF’s annual gathering in Switzerland, colloquially referred to as Davos, the city that hosts the forum every year. President Trump reminded everyone listening that he intended to “obliterate” the US budget deficit, while somehow convincing the US Congress to pass “the largest tax cut in American history” at the same time.
Also on President Trump’s docket of things to cover was Crude Oil prices, which he intends to ask the Organization of the Petroleum Exporting Countries (OPEC) to find a way to lower, prompting a quick sell-off in barrel bids. OPEC has historically been known for putting in efforts to raise or stabilize Crude Oil prices, and it remains unclear how the world’s largest Crude Oil cartel would react or even comply with the claim.
President Trump also reiterated his offer for Canada to become a member state of the US, declaring that the US’ current trade deficit with Canada, which currently stands at around 4% of the total US trade overhang, is unsustainable. President Trump also floated a thinly-veiled reminder of possible plans for tariffs on EU goods imported into the US in retaliation for the EU treating the US “very badly”.
Dow Jones news
Most of the Dow Jones’ listed securities are drifting into the high end on Thursday as investors lean into a general improvement in risk appetite. The Travelers Companies (TRV) fell back 1.8% to lead the handful of losers into the red, declining to $242 per share as investors take profits following this week’s surge on better-than-expected revenue reporting. Caterpillar (CAT) rose 2.6%, tapping $408 per share and touching its highest bids since last November.
Dow Jones price forecast
Thursday’s gains put the Dow Jones Industrial Average on pace to close in the green for a fifth straight session, and the major equity index has gained ground in all but one of the last nine straight trading days. Bullish momentum is grinding its way back to record highs just north of 45,000, but first bidders will need to climb back above the 44,800 level.
Price action has extended firmly beyond the 50-day Exponential Moving Average (EMA) near 43,230, and the Dow Jones’ long-run trend of outpacing the 200-day EMA is still firmly in place. A pattern of higher lows is also firmly baked into the chart, and traders hoping for signals to get short will be forced to sit on the sidelines for the time being.
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.