- The Dow Jones bottomed out around 550 points lower, or over 1.3% on Wednesday.
- Markets have returned to worrying that interest rates will stick higher for longer.
- Sharp declines in key equities are exacerbating declines.
The Dow Jones Industrial Average (DJIA) is on pace to grapple with a losing week, something the major equity index hasn’t had to do since August. The Dow turned further bearish on Wednesday, dropping over 550 points at its peak and shedding over 1.3% from the day’s opening bids.
Despite a jumbo 50 bps rate cut from the Federal Reserve (Fed) in September, markets have again returned to fretting about the possibility of higher-for-longer interest rates. Bond yields stepped higher on Wednesday, prompting an overall decline in equities in a self-fulfilling prophecy: investors worried about the dizzying heights reached by large-cap equities are beginning to pull back from record highs, trimming overbought equities.
Despite US economic data routinely beating expectations, markets remain concerned that the US economy will begin to feel the long-term effects of high interest rates that reached a 16-year peak of 5.5% in 2023. The Fed released some of the pressure in September by trimming rates by half of a percent, but now investors are turned skeptical that the Fed will be pressured into delivering a projected further 50 bps in rate cuts through the remainder of the year.
Dow Jones news
All but five of the Dow’s listed securities are testing into the red on Wednesday, with losses led by food giant McDonald’s (MCD). It is down around 5% and testing below $300 per share after an E. coli outbreak at one of its food suppliers was announced.
Despite a solid earnings report for the third quarter, investors have decided that 3M’s (MMM) quarterly performance isn’t good enough. The Post-it Note producer’s share price declined around 3.5%, falling below $127 per share.
Dow Jones price forecast
The Dow Jones is experiencing a pullback after rallying since late September. Price action has fallen back below the 43,000 handle, though rising support from the 50-day Exponential Moving Average (EMA) remains well below current bids.
The Moving Average Convergence-Divergence (MCAD) indicator is poised for further declines with the histogram crossing back into negative territory. However, a long-run bull market in the Dow Jones leaves oscillating indicators at a notable disadvantage. Traders looking to go short on the Dow should wait for a bearish confirmation and a pullback to minimize upside risks.
Dow Jones daily chart
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