- Main equity indexes in the US opened in positive territory on Wednesday.
- S&P 500 set a new all-time high near 5,000.
- Investors keep a close eye on earnings reports.
The S&P 500 (SPX) index rises 0.48% to trade at 4,977.84, the Dow Jones (DJIA) increases 0.37% to 38,664.72, and the Nasdaq (IXIC) gains 0.55% to trade at 15,683.43 at the time of writing.
Stock market news
- The Technology Sector is the best performing S&P 500 major sector, rising 1%. The Real Estate Sector is down 0.15%.
- Enphase Energy Inc (ENPH) is the top gainer in the S&P 500, with an increase of nearly 18%. V.F. Corp (VFC) is the top decliner, losing more than 13%.
- The data from the US showed that the goods and services deficit was $62.2 billion in December, up $0.3 billion from $61.9 billion in November.
- The Federal Reserve will publish Consumer Credit Change later in the day, and Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin will also be speaking.
- In an interview with CNBC on Wednesday, Minneapolis Fed President Neel Kashkari said they can dial back the policy rate quite slowly if the labor market continues to be strong. “At the moment, two to three rates cuts this year seems appropriate,” he added.
- Late Tuesday, Qatar, acting as a mediator, said that Hamas had given a “generally positive” response to a proposed truce deal with Israel. Although it’s too early to say whether there will be further progress in peace talks, a de-escalation of the conflict in the Middle East could attract risk flows. According to Israel’s Channel 13, an Israeli official said that some of the demands made by Hamas in the counterproposal were entirely unacceptable.
- Alibaba Group Holdings Ltd. (BABA) reported Q3 adjusted net income of RMB 47,951 million and Q3 revenue of RMB 260,348 million on Wednesday. In its earnings report, the company said that the board of directors approved an increase of $25 billion to the share repurchase program. “Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing,” Alibaba said, per Reuters.
- Uber Technologies Inc (UBER) announced Q4 net income of $1.4 billion and Q4 gross bookings of $37.6 billion. Net revenue for that period was $9.94 billion. “Uber’s platform advantages and disciplined investment in new growth opportunities resulted in record engagement and accelerating Gross Bookings in Q4,” Chief Financial Officer Prashanth Mahendra-Rajah said, per Reuters.
- Walt Disney Company (DIS), ARM Holdings PLC (ARM) and Paypal Holdings Inc (PYPL) are among top companies scheduled to announce earnings after the closing bell on Wednesday.
- Federal Reserve Bank of Philadelphia President Patrick Harker said on Tuesday that the central bank made the right choice last week to maintain interest rates steady amid an outlook that likely heralds more inflation declines. “The data point to continued disinflation, to labor markets coming into better balance, and to resilient consumer spending—three elements necessary for us to stick to the soft landing we remain optimistic to achieve,” he added.
- The CME FedWatch Tool shows that markets are pricing in a 21.5% probability of a 25 basis points Fed rate cut in March.
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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