Dow Jones Industrial Average grinds higher on Wednesday
- The Dow Jones added another 120 points during calm Wednesday markets.
- US ADP payroll figures point to net job gains that are better than expected.
- US ISM PMI figures came in softer than expected, but investors are shrugging off the bad print.
The Dow Jones Industrial Average (DJIA) climbed 120 points on Wednesday, bolstered by a general improvement in market sentiment. Firmer-than-expected prints in jobs preview data ahead of Friday’s upcoming Nonfarm Payrolls (NFP) report helped to keep markets buoyed, adding to gains as investors recover from an early-week plunge sparked by trade war threats from US President Donald Trump that came up empty for a third time in a row.
The ADP Employment Change amount from January exceeded expectations, suggesting 183K net new jobs were added according to payroll services provider ADP. The figure came in above the revised print of 176K from December, flouting the median market forecast of 150K.
US ISM Services Purchasing Managers Index (PMI) survey results missed the mark, easing to 52.8 from a revised 54.0, flubbing the market’s expected uptick to 54.3. The softer figure dampened sentiment somewhat, but only briefly as traders look for reasons to hit the buy button.
Dow Jones news
Most of the Dow Jones is testing into the high side as broad-market sentiment generally improves. Familiar market favorites Amgen (AMGN) and Nvidia (NVDA) are climbing on Wednesday, gaining 5.5% and 4.5%, respectively. Amgen beat the street on Q4 financial results, reported late on Tuesday, and the biotech firm is trading back above $300 per share.
Dow Jones price forecast
The Dow Jones is grinding its way back toward 44,800, with price action drifting into the top-end after kicking the trading week off just south of the 44,000 major price handle. The Dow is set to snap its latest pullback with a three-straight bull run, and the immediate target for bidders will be the 45,000 handle that lies ahead.
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.