Dow Jones Industrial Average recovers after Tuesday’s post-Fed slump

July 9, 2024 8:32 pm

  • Dow Jones struggles to shrug off early Fed-fueled declines.
  • Fed comments came in more hawkish than expected, rattling investor sentiment.
  • The long wait to Fed rate cuts continues as US inflation data looms ahead.

The Dow Jones Industrial Average (DJIA) tumbled in early Tuesday trading after Federal Reserve (Fed) Chairman Jerome Powell delivered less-dovish-than-expected talking points while testifying on the Fed’s semiannual Monetary Policy Report in the first of two appearances in as many days. A brief recovery rally after Tuesday’s early dump failed to gain traction and bids are battling it out on the low end of the day’s trading.

On Tuesday, Fed Chairman Jerome Powell presented the Fed’s semiannual Monetary Policy Report to the Senate Committee on Banking, Housing, and Urban Affairs. He emphasized the Fed’s commitment to waiting for inflation to ease towards the 2% annual target, which disappointed investors hoping for signs of interest rate cuts. As a result, risk appetite decreased, and the US dollar strengthened.

Powell will deliver the second half of the report to the Congressional House Committee on Financial Services on Wednesday, and no changes in rhetoric or new information are expected.

Later this week, June’s US Consumer Price Index (CPI) inflation is scheduled for Thursday, followed by Friday’s US Producer Price Index (PPI) wholesale inflation. Core CPI in June is expected to remain at 3.4% YoY, while core PPI for the same period is projected to increase to 2.5% from the previous period’s 2.3%. Meeting these forecasts may disappoint markets that are expecting a quarter-point rate cut from the Fed at the September 18 rate call due to the anticipation of slowing inflation.

Dow Jones news

Despite over half of the Dow Jones index being in the red on Tuesday, strong gains at the top of the board drag the overall equity average higher. Banking stocks are leading the charge higher, with Goldman Sachs Group Inc. (GS) climbing 2.77% to $477.89 per share, followed by JPMorgan Chase & Co. (JPM) climbing nearly 2% over $209.00 per share.

On the low side, Salesforce Inc. (CRM) has fallen back -1.91% on the day, battling with $252.00 per share as the customer tracking software company finds a halting recovery on promises of deeper AI integration into the company’s offerings.

Dow Jones technical outlook

Dow Jones initially plunged on Tuesday, dropping toward 39,120.00 before a sharp recovery rally to set an intraday high of 39,489.00. The DJIA is set to waffle around Tuesday’s opening bids near 39,360.00.

Daily candles continue to churn in the midrange as price action gets squeezed between the 50-day Exponential Moving Average at 38,998.14 and a supply zone priced in near the 40,000.00 major handle.

Dow Jones five minute chart

Dow Jones daily chart

Economic Indicator

Consumer Price Index ex Food & Energy (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.

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