Dow Jones Industrial Average bounces up supported by soft US services data

Dow Jones Industrial Average bounces up supported by soft US services data

  • Dow Jones bounces up as soft US services data eases concerns about a “higher for longer” monetary policy outlook. 
  • US Services activity softened against expectations in March with the Prices Paid sub-index posting its lowest reading in years. 
  • Intel is leading losses in the Dow Jones after news of hefty losses in its foundry business.

The Dow Jones Industrial Average (DJIA) has moved into positive territory following a weak opening. The soft US services activity data has offered some relief to investors, increasingly concerned that a string of strong US macroeconomic releases would force the Fed to dial down their monetary easing plans.

The US ISM Services PMI eased to 51.4 in March from 52.6 in February against market expectations of a slight increase to 52.7. Beyond that, the Prices Paid sub-index retreated to 53.4 from 58.6 in the previous month. This is the lowest reading in years and suggests a disinflationary contribution to the economy. These figures have offset the impact of strong ADP employment figures and the hawkish comments by Fed Chair Powel and Atlanta Fed President, Bostic.

All three main Wall Street Indexes have jumped after the release of the ISM Services PMI report. The NASDAQ is leading gains with a 0.5% advance to 16,319, followed by the S&P 500, up 0.3% to 5,223 and the Dow Jones is lagging with a 0.1% advance, trading at 39,220, still well below the 40,000 high hit last week.

Dow Jones news

The Industrials sector is the best performer with a 0.75% advance followed by materials, which adds 0.66% on Wednesday. On the losing end, only two of the eleven sectors are in the red with Consumer Staples losing 0.95% followed by the Utilities, down 0.1%.

Down to single stocks, the market is showing a more mixed picture. Intel (INTC) fell 7% to $40.78 hammered by a report stating that its foundry business recorded an operating loss of $7 billion in 2023.

Next is Procter & Gamble (PG), down 2.36% to $156.81, and Johnson & Johnson (JNJ), losing 1.6% to $155.19.

On the positive side, Caterpillar (CAT) advances 2.3% to $373.252, followed by Amazon (AMZN), which is 1.07% up at $182.63.

Dow Jones technical outlook

The technical picture is little changed from Tuesday, with the Dow Jones Index correcting lower, yet with the broader bullish trend still intact. Price Action remains contained between the 50% and the 61.8% Fibonacci retracement of the March rally, at 39,300, with bears in control after the rejection at the 40,000 psychological level last week. 

The 39,000 support area is holding sellers for now and closing the path to the trendline support, now at 38,850. On the upside, the index is struggling to breach the mentioned 50% Fibonacci retracement at 39,195. Further up at 39,457 and the mentioned 40,000 would be the next targets.

Dow Jones 4-Hour Chart

 

Nasdaq FAQs

The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

 

 

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