- Dow Jones briefly tipped into a new record high, but cautious tones remain.
- Fedspeak dominates headlines on quiet Monday, risk appetite hesitates.
- Rate markets still bet on September rate cut, but odds are easing.
The Dow Jones Industrial Average (DJIA) tested into a new all-time record high on Monday, but price action is getting pushed into the middle near the 40,000.00 handle. Federal Reserve (Fed) officials are appearing in force to kick off the new week, with a slew of policymakers giving cautious comments on Monday. Further comments from Fed officials are expected on Tuesday.
Key inflation data eased slightly below expectations last week, pinning broad-market hopes for Fed rate cuts higher. Despite a better-than-expected inflation print last week, price growth remains well above the Fed’s 2% annualized target. Key Fed members remain concerned that progress on inflation may be stalling out.
Read more: Fed officials speak cautiously on policy outlook after April inflation report
The latest Meeting Minutes from the Fed’s Federal Open Market Committee (FOMC) will be published this week, followed by US Purchasing Managers Index (PMI) figures. New and used Home Sales as well as Durable Goods are due later in the week.
The CME’s FedWatch Tool shows rate markets are still pricing in at least 25 basis points in rate cuts from the September Fed rate meeting, but odds are slipping back. At current cut, rate traders are pricing in around 63% odds of a quarter-point cut in September.
Dow Jones news
Over half of the constituent equities that make up the Dow Jones are in the red on Monday, with JPMorgan Chase & Co. (JPM) leading the losers lower, backsliding -2.7% and falling below $200 per share. JPM is pulling back after hitting a new 52-week high near $205.00 recently.
On the high side, Caterpillar Inc. (CAD) rose 1.7% to $362.40 per share. Caterpillar was closely followed by Boeing Co. (BA), which rose 1.45% to $362.50 per share.
Dow Jones technical outlook
The Dow Jones clipped into a fresh all-time high of 40,070.82 on Monday before cautious investors dragged the mega cap index back down to 39,900.00. Despite softening bids to kick off the new trading week, the DJIA remains firmly-planted in bull country.
The Dow Jones is still up nearly 6% in 2024, and is trading well above the 200-day Exponential Moving Average (EMA) at 37,090.37.
Dow Jones five-minute chart
Dow Jones daily chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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