Dow Jones Industrial Average declines ahead of FOMC Minutes release
- Dow Jones trades near 44,380 as investors await the Federal Reserve’s January meeting minutes.
- Fed policymakers emphasized patience, removing language about inflation progress in their latest statement.
- US President Donald Trump announced 25% tariffs on cars, pharmaceuticals, and semiconductors.
The Dow Jones Industrial Average (DJIA), which measures the performance of 30 large-cap United States (US) stocks, is under pressure, trading around 44,380. Investors are awaiting the Federal Reserve’s (Fed) January meeting minutes for insights into the central bank’s stance on inflation and interest rates. Market sentiment weakened after US President Donald Trump announced new tariffs on key imports.
Daily digest market movers: Dow Jones slides as Fed minutes loom
- The Federal Reserve kept interest rates steady at 4.25%-4.50% but removed language suggesting inflation progress.
- Fed officials reiterated that patience is necessary before making any policy adjustments, emphasizing the need for more data.
- Philadelphia Fed President Patrick Harker and Atlanta Fed President Raphael Bostic signaled no rush to cut rates.
- Elsewhere, President Donald Trump announced 25% tariffs on cars, pharmaceuticals, and semiconductors, effective by April.
- In addition, trade tensions rose as US-Russia peace talks on Ukraine stalled, with Trump blaming Ukraine for the lack of progress which contributed to a sour market mood.
- Market participants remain cautious ahead of the Federal Open Market Committee (FOMC) minutes release.
DJIA Technical Analysis
The Dow Jones has slipped below the 20-day SMA at 44,580, reinforcing bearish momentum. Sellers are gaining ground as uncertainty over Federal Reserve policy and trade tensions weigh on sentiment. A sustained move below 44,350 could accelerate declines while buyers need a recovery above 44,600 to regain control.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.