- The Dow Jones accelerated into further losses, falling nearly 0.8%.
- Losses are concentrating in the Dow as investors second-guess Fed action.
- Continued declines in key health and tech stocks are further dragging the Dow lower.
The Dow Jones Industrial Average (DJIA) shed another 300 points on Tuesday as losses accumulate in the key index and begin to gather speed. Investors have been chasing interest rate cuts from the Federal Reserve (Fed) since last December, but now concerns of getting too much of a good thing are giving traders cause for a pause.
The Fed is broadly expected to deliver another quarter-point rate cut on Wednesday, bringing its target rate down to the 4.25%-4.5% range. The fed funds rate peaked at 5.0%-5.5% in July of 2023, and investors clamored for interest rate cuts to provide funding relief for 13 straight months before the Fed finally delivered a jumbo 50 bps rate slash in September and followed it up with another 25 bps rate trim in November. Now investors are second-guessing Fed moves on interest rates, and questioning whether the US central bank may be moving too fast, too far in the face of recent US economic data.
According to the CNBC Fed Survey for December, some investors are beginning to pivot into an uncertain stance in the face of steeply-inflationary policy threats from incoming President Donald Trump. Roughly one-third of respondents noted that it may be time for the Fed to reassess its rate-cutting strategy.
Stocks initially rallied on the news of a decisive Trump election win, but now those same animal spirits are beginning to wonder if the threat of global tariffs, sweeping deportation policies, and entering into unilateral trade wars with all of the US’ major trading partners at the same time may not be as positive for stock performance as many investors initially believed. Adding to the uncertainty of policy impacts, some analysts are recalling Trump’s campaign promises to renegotiate the USMCA trade deal that he initially negotiated during his first presidency.
Dow Jones news
Despite the Dow Jones holding roughly on-balance on Tuesday with about half of the index’s listed securities trading in the green, concentrated losses in household names are dragging the price-weighted board lower. Unitedhealth Group (UNH) continues to decline as public opinion of health insurance providers sinks even lower in the wake of the assassination of C-level United Health executive Brian Thompson. The same day Brian Thompson was slain, UNH shareholders celebrated windfall profits for the health company, which have been primarily perceived as coming from an associated rise in insured claims rejections at the health giant. UNH fell an additional 3.5% on Tuesday, testing $480 per share after hitting an all-time high of $630.73 in November.
Adding to the Dow’s losses was a decline in Nvidia (NVDA), which declined another 1.7% on the day and broke below $130 per share for the first time since mid-October. Investors may have concerns that Nvidia’s broad-based pivot into providing computational crunching power for the AI space may be running into issues as widespread reports of overheating in Nvidia chip solutions accumulate.
Dow Jones price forecast
The Dow Jones’ 330 point decline on Tuesday sets up the major equity index for its longest day-over-day losing streak, and the DJIA is on pace to close in the red for a ninth straight session. The Dow has pierced the 50-day Exponential Moving Average (EMA) for the first time since late October, back when price action was testing a technical floor near the 42,000 handle.
The Dow Jones closed above 45,000 for the first time ever in early December, but a near-term backslide has seen the DJIA shed 3.8% top-to-bottom. While bearish momentum is in control of the key stock index, bidders are likely waiting in the wings for a fresh bounce off of the key 50-day EMA with an immediate price floor near the last swing low of 43,000.
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.