- The Dow Jones treaded water on Friday following a late-week holiday closure.
- Major equity indexes are awaiting key US economic data next week.
- Fed rate cut expectations are creeping back to the forefront.
The Dow Jones Industrial Average (DJIA) held steady on Friday, sticking to chart territory just above the 42,000 major price handle. US equities are increasingly pivoting toward Federal Reserve (Fed) rate cut expectations, and a series of key US data releases next week will draw increased investor attention.
Coming up next week: PMIs, Fedspeak, PCE inflation
The next batch of S&P Global Purchasing Managers Index (PMI) figures will kick things off next Monday. Aggregated business sentiment figures are expected to ease slightly in both the Services and Manufacturing components.
Fed Chair Jerome Powell also begins his two-day testimony before congressional and Senate financial committees on Tuesday. There will be significant pressure on the Fed head to explain why the Fed is so concerned about policy uncertainty, but not worried enough to deliver rate cuts that could alleviate some of the US’s debt servicing costs.
May’s iteration of the Fed’s favored inflation metric, the Personal Consumption Expenditure Price Index (PCE), will also be released next week, due on Friday. Policy makers and policy watchers are both bracing for potential economic fallout from the Trump administration’s tariff policies, and the post-tariff window on trade, manufacturing, and consumption is widening as headline datasets begin to include dates after President Trump’s self-styled “Liberation Day” tariffs.
Read more stock news: US stocks open higher as Fed governor calls for rate cuts on Triple Witching Day
Dow Jones price forecast
The Dow Jones Industrial Average remains mired in a near-term consolidation phase. The major equity index is churning chart paper just above the 42,000 price handle, but intraday prices are still finding technical support from the 200-day Exponential Moving Average (EMA) near 41,770.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
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