- The Dow Jones rose 450 points on Thursday as sentiment recovered.
- US GDP figures bolstered investor confidence after printing above expectations.
- US PCE inflation numbers still loom ahead on Friday.
The Dow Jones Industrial Average (DJIA) rose 1.1%, or 450 points, on Thursday, buoyed by a forecast beat in US Gross Domestic Product (GDP) growth numbers in Q2. US Personal Consumption Expenditure Price Index (PCE) inflation data, due on Friday, is still the key print of the week. Markets remain confident that the Federal Reserve (Fed) is on pace to kick off a rate-cutting cycle in September. An afternoon pullback in the equity space dragged the Dow Jones lower, squeezing the day’s gains to around 200 points.
US Q2 GDP beat forecasts Thursday morning, propping up market sentiment and sending investors back into a bidding stance. Annualized Q2 GDP came in at 3.0% compared to the expected hold at 2.8%, and Initial Jobless Claims also ticked down to 231K for the week ended August 23. Investors had expected a print of 232K compared to the previous week’s revised 233K.
US core PCE inflation on Friday is expected to hold steady MoM and drift slightly higher on an annualized basis. July’s MoM core PCE inflation is forecast to hold at 0.2%, while the YoY figure for July is expected to tick up to 2.7% from the previous 2.6%. A below-expectations print will send markets piling back into hopes for an extended initial cut from the Fed on September 18, while an above-forecast release could send traders scurrying in the face of a potential resurgence in inflation, hobbling the Fed just before a widely-expected cut.
Dow Jones news
A risk-on Thursday has most of the Dow Jones index trading into the green in the back half of the trading week. Only three of the Dow’s listed securities are in the red for the day, with Home Depot (HD) shedding around seven-tenths of one percent to trade below $370.00 per share.
Nvidia’s (NVDA) after-hours earnings call this week failed to jump-start tech-keen investors. Nvidia reported less-than-expected growth in earnings, with an overall uptick in profit failing to meet sky-high expectations set by runaway investors.
Dow Jones price forecast
The Dow Jones is back over 41,300 on Thursday after a brief midweek dip below the 41,000 handle. The index took a breather on Wednesday, but it has tilted back into the bullish side as daily candles continue to test chart paper near record highs set at the beginning of the trading week.
Traders hoping to capitalize on a bearish pullback run the risk of underestimating bullish market pressure, but risk-takers will be looking for signs of a technical breakdown to jump on the short train. Immediate technical targets are floating near the 50-day Exponential Moving Average (EMA) just above the 40,000 major price handle.
Dow Jones daily chart
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.
Source: https://www.fxstreet.com/news/dow-jones-industrial-average-recovers-footing-on-thursday-202408291828