Dow futures rose 0.14% to trade above 48,500 during the European session on Monday, while S&P 500 and Nasdaq 100 futures also advanced, rising 0.35% and 0.53% to nearly 6,910 and 25,700, respectively. However, trading volumes are expected to remain light as trading enters a holiday-shortened week before Christmas.
US index futures rose after Wall Street posted strong gains in the previous session, led by the outperformance of technology stocks. In Friday’s regular session, the Dow Jones rose 0.38%, the S&P 500 advanced 0.88%, and the Nasdaq Composite jumped 1.31%, with major companies extending gains amid renewed optimism surrounding AI-related stocks.
Market sentiment may turn cautious amid Fed’s measured policy outlook. Cleveland Fed President Beth Hammack said Sunday that policy is well positioned to pause and assess the impact of 75 basis point interest rate cuts on the economy during the first quarter, according to Bloomberg.
The CME FedWatch tool indicated a 78.0% probability of holding interest rates at the Fed’s January meeting, up from 75.6% the week before. Meanwhile, the probability of a 25 basis point rate cut fell to 22.0% from 24.4% a week ago.
Traders are also awaiting third-quarter US GDP data, corporate earnings and industrial production, after last week’s data boosted expectations for further Fed rate cuts next year.
Dow Jones FAQs
The Dow Jones Industrial Average is one of the oldest stock market indexes in the world, consisting of the 30 most actively traded stocks in the United States. The index is price-weighted and not market capitalization-weighted. It is calculated by summing the component stock prices and dividing them by a factor that currently amounts to 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years, it was criticized for not being broadly representative enough because it tracks only 30 conglomerates, unlike broader indices such as the S&P 500.
There are many different factors that drive the Dow Jones Industrial Average (DJIA). The overall performance of the constituent companies disclosed in the company’s quarterly earnings reports is the headline performance. US and global macroeconomic data also contribute to its impact on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also affects the Dow Jones Industrial Average because it affects the cost of credit, on which many companies rely heavily. Therefore, inflation can be a key driver along with other metrics that influence the Fed’s decisions.
Dow Theory is a method of determining the fundamental trend of the stock market developed by Charles Dow. The basic step is to compare the trend 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. Size is a confirmatory criterion. The theory uses elements of peak and trough analysis. Dow Theory postulates three phases of a trend: accumulation, when smart money starts buying or selling; Public participation, when the wider public joins in; And distribution, when the smart money comes out.
There are a number of ways to trade the DJIA. The first is the use of ETFs that allow investors to trade the Dow Jones Industrial Average as a single security, rather than having to buy shares in all 30 component companies. A leading example of this is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures allow traders to speculate on the future value of an 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 purchase a share of a diversified portfolio of DJIA stocks and thus provide exposure to the overall index.
