- The Dow Jones pushed back into the high end of near-term consolidation on Tuesday.
- Equity markets are bracing for the results of the US election showdown that kicks off this week.
- Indexes have been rangebound heading into the election window.
The Dow Jones Industrial Average (DJIA) gained ground on Tuesday, climbing around 400 points to add nearly a full percent to its top-line. The major equity index is bumping into the ceiling of a near-term consolidation range as investors brace for the outcome of the US election as US voters head to the polls.
Another Federal Reserve (Fed) rate call looms ahead this week. Fed Chair Jerome Powell is widely expected to deliver another quarter-point cut to interest rates on Thursday, bringing the Fed Funds Rate down 25 bps to 4.75%. The Fed Funds Rate peaked at 5.5% in July of 2023, and investors have been clamoring for a return to a low interest rate environment that has become familiar territory since US interest rates clattered to an all-time low near 0% in early 2009.
US election odds have both candidates neck-and-neck in a dead-heat race for the Presidency, with former President Donald Trump and current Vice President Kamala Harris polling within 5% of each other, depending on which poll results you reference. Equity investors, tech sector addicts specifically, appear to broadly believe former President Trump to be the preferred stock-friendly candidate, an odd choice considering the Republican candidate has strongly voiced support of a return to the Smoot-Hawley tariff era of US history. Trump has regularly suggested stiff tariffs across the board on all imported goods into the US, an incredibly inflationary economic policy proposal.
The University of Michigan’s (UoM) Consumer Sentiment Index is waiting in the wings and slated for release on Friday. Investors expect November’s UoM sentiment indicator to climb to a six-month high of 71.0 from the previous month’s 70.5.
Dow Jones news
Most of the Dow Jones equity board is firmly in the green on Tuesday, with less than ten of the index’s listed securities down by half of a percent or more. Losses are being led by Boeing (BA), which backslid nine-tenths of a percent and falling below $154 per share. Boeing briefly rallied early Tuesday after announcing that the aerospace company finally negotiated an end to their workers’ strike, but markets remain concerned about the airplane manufacturers profitability looking forward and sent the ticker back into the low end.
Intel (INTC) rose over 4% on Tuesday, climbing into $23.50 per share despite an announcement that the Dow Jones Industrial Average would be dropping the chipmaker in favor of long-running AI rally darling Nvidia. Nvidia will be included in the Dow Jones equity roll beginning on Friday, November 8.
Dow Jones price forecast
The Dow Jones has seen some near-term chop as the major index grinds out chart paper around the 42,000 major handle. Price action has been pinned to the 50-day Exponential Moving Average (EMA) since dipping into its current range at the end of October.
Despite recent consolidation, the Dow Jones remains pinned deep into bull country. The index has outpaced its 200-day EMA for over a year straight and has closed higher for all but two of the last 11 straight calendar months.
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-claws-back-300-points-ahead-of-us-election-results-202411051718